Astral Foods Ltd. (ARL) said Mozambique is a country to chase poultry investments as South Africa’s largest chicken producer by sales diversifies into neighboring markets to avoid import quotas and benefit from higher profit margins.
“The Mozambican government knows of our efforts to invest in the country,” Chief Executive Officer Chris Schutte said in an interview on Oct. 25. “It is a country where you can chase investments” and chicken eaten is a fraction of South Africa.
The company, based in Pretoria, on Oct. 5 opened a hatchery 45 kilometers (28 miles) southwest of Mozambique’s capital city Maputo after owning a feed mill in the country since 2000. Astral also owns a feed mill and hatchery in Zambia.
“These countries have political stability, double-digit economic growth and there’s people,” Schutte said.
South Africans eat an average 36 kilograms (79 pounds) a year of chicken compared with about 7 kilograms in Mozambique and 12 kilograms in Zambia, South African Poultry Association Chief Executive Officer Kevin Lovell said on Oct. 26. At the same time South Africa’s poultry producers are facing increased competition at home from Brazilian and European imports.
Astral cut 150 jobs in August and froze pay for its 12,000 employees Oct. 18 as it also struggles with higher feed costs. Yellow corn and soy cake, a by-product of crushing soybeans, accounts for about 74 percent of the company’s costs. About 20 percent of chicken eaten in South Africa is imported.
The government in February imposed extra import tariffs of as much as 63 percent on shipments of some cuts of chicken after saying initial information showed Brazil was dumping products in Africa’s biggest economy as well as neighboring African nations.
Setting up operations in other countries, sourcing and mixing chicken feed, building hatcheries and broilers and constructing abattoirs, can take years, Schutte said.
“Some of the small-farmers who supply our Zambian feed mill deliver their corn in wheelbarrows,” Schutte said. Road quality, to get grain to the mills, and the volatility of African currencies are some of the risks of entry, he said.
Astral, which said Oct. 16 it sees full-year earnings per share down 30 percent to 35 percent, declined for a 14th day, sliding as much as 1 percent to 92 rand, the lowest since May 13, 2009, and was at 93.35 rand by 11:20 a.m. in Johannesburg. It’s the longest losing streak since it began trading in 2001.
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