Unlike the Daybreak Foods debacle, Astral stands strong and profitable — not to mention being in a position to fork out an interim dividend instead of scurrying for urgent funding.
The group has been relentlessly cost-focused for many years and the business model is refreshingly devoid of any of the corporate frills that often adorn large companies. Executives and senior management have never lost sight of the fact that they are in the unglamorous role of running a chicken business.
Notwithstanding efforts at maintaining a spartan culture, the segmental breakdown shows the poultry segment turnover of R8.8bn whittled into an operating loss of R26m in the interim period.
Looking to the future, the group should be able to capitalise on improved prospects for the local maize crop, with an expected increase in supply benefiting feed costs. If hard-won operating efficiencies kick through in the next six months and there is the slightest uptick in consumer spending, it could be a great chance for lean and mean Astral to claw back profits.
But there are still serious obstacles to navigate. Bird flu is an ever-present risk (Astral highlighted a lack of progress in securing approval for a vaccine). Then there are the parlous growth prospects for the South African economy, together with high unemployment and the influx of cheaper imported chicken parts.
Interestingly, Astral has moved into a net cash position. It certainly has the firepower for acquisitions — if such an idea ever dawns on it.
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