Spike in input costs hits Quantum’s bottom line

Categories

DURBAN – QUANTUM Foods, the diversified feeds and poultry business, yesterday reported a 22 percent decline in earnings for the six months to end March, primarily due to the continuous increase in input costs, which the company said could not be fully recovered from the market.

Its headline earnings per share declined to 26.9 cents a share, down from the 34.5c and operating profit fell by 19 percent to R74 million while revenue increased by 8.4 percent to R2.64 billion. In South African operations, revenue was up by 8.1 percent and other African revenue increased by 13.9 percent. The cost of key feed raw materials was predominantly impacted by an increase in international prices of these commodities.

“The average rand to US dollar exchange rate over the current reporting period was in line with the six months to end March 2020. However, the exchange rate was highly volatile during the current reporting period, increasing the complexity of raw material procurement decisions,” the group said. Quantum Foods was also hit by an increase of 26 percent on the average price of yellow maize on the South African Futures Exchange during the period.

It also said the landed price of soya meal increased by 28 percent while the average bran price decreased by 3 percent and the average price of hominy chop increased by 14 percent compared to a year earlier. “Accordingly, the weighted average cost of layer and broiler feed increased by 16 percent and 19 percent respectively compared to last year,” the group said.

The group reported an outflow of R1m during the period compared to cash inflow from operating activities of R74m reported a year earlier.

It opted not to declare an interim dividend during the period.

“As a result of the decline in cash and cash equivalents, the expectation of a continued challenging trading environment due to high feed raw material costs and muted consumer expenditure, to preserve cash for the approved capital programme and possible acquisitive growth opportunities and risk associated with the outbreak of Highly Pathogenic Avian Influenza (HPAI) in South Africa in April 2021, the board has resolved not to declare an interim dividend,” the group said.

Last year Quantum declared an interim dividend of 6c a share.

Looking ahead, Quantum said the feed raw material costs were expected to increase further during the remainder of the 2021 financial year.

“This will result in higher costs throughout the business, especially impacting earnings from the eggs segment. Maintaining margins and volumes in the animal feeds segment will be dependent on the ability of our customers to recover higher costs from the end customer,” the group said.

Quantum Food’s share price closed unchanged at R5.95 on the JSE yesterday.

[email protected]

BUSINESS REPORT



Source link