Government asleep at the wheel – Astral CEO

South Africa’s largest poultry producer, Astral Foods, has accused the government of being “asleep at the wheel” in tackling the electricity crisis, which crippled the company’s performance.

Astral reported a decrease of 90% in interim profits for the six months to the end of March, despite revenue increasing 6% to R10 billion.

The company said load-shedding and a tough economic environment were to blame for the decrease.

The poultry producer also warned of the potential for future social unrest due to rising food prices, increased load-shedding, and deteriorating public services.

Astral’s results came during an “extremely trying operational environment” with the “dramatic demise of Eskom”, failing water supply, and logistical inefficiencies.

The company said instead of effectively responding to these problems, “the government is asleep at the wheel”.

Load-shedding is decimating all the benefits of Astral’s economies of scale and operational inefficiencies from being an integrated poultry producer.

The company spent R741 million over the last six months to mitigate load-shedding. R150 million was diesel costs alone.

Feed costs make up the bulk of additional costs from load-shedding as the company cannot process its slaughtered chickens during elevated stages of power cuts.

Chris Schutte, CEO of Astral, told SABC that load-shedding forces them to keep the chickens on their farms for longer and thus feed them for an extended period.

Load-shedding alone adds R3.20 in costs per kilo of chicken Astral produces. While the company is not passing this on to consumers, Schutte warned it would eventually have to.

Because of these costs, Astral’s poultry division is currently operating at a loss which is unsustainable.

In a normal scenario, chicken prices should have decreased in South Africa. However, load-shedding and inefficient public services have kept prices higher for longer.

Schutte warned that this would make South Africa’s agriculture sector globally uncompetitive.

Astral did not declare a dividend for the period due to its profits plummeting and the volatile operating environment in South Africa.