Astral expects lower earnings, blames municipality for higher operating costs

Poultry producer Astral [JSE:ARL] expects lower earnings due to a combination of higher feed prices, production related cost increases and lower selling prices for poultry, the group said.

According to a trading statement issued on Tuesday, the higher operating costs are attributed to Lekwa Municipality.

"Poor management of municipal infrastructure within the Lekwa (Standerton) Municipality, particularly water reticulation and supply which is crucial for a poultry processing plant, has resulted in unnecessary costs for Astral in the recent past, and ongoing infrastructural failure is causing a dire situation for Astral’s operations in the area," the trading update read.

Astral projects that shareholder earnings for the interim trading period will be more than 50% lower.

"A reasonable degree of certainty exists that Astral Foods' earnings per share for the six months ended 31 March 2019 will reflect a decrease of between 55% and 50% compared to the previous comparable period," the notice read.

"This implies that earnings per share is expected to be between 881 and 979 cents per share."

The group also restated earnings per share for the same period last year from 1 973 cents per share to be 1 958 cents per share.

Headline earnings will also be significantly lower – between 55% and 50% lower – compared to the same period last year. "This implies that headline earnings per share is expected to be between 882 and 980 cents per share," the trading update read. 

Headline earnings for the same period last year have also been restated from 1 974 cents per share to 1 959 cents per share.

Astral explained that the restated profit figures are as a result of transactions which apply to the 2017 financial year, and not the 2018 financial year as previously stated.

Astral's share price which opened at R177 on Tuesday, was trading at R176.77 ahead of the release of the trading update at 10:30, before dropping as low as R170.06. By 11:32 the share was trading slightly lower (0.66%) at R176.46.

Astral will release its interim financial results on May 13.

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