Astral Foods (Sell, TP ZAR 130/share) - H1 17A result review: Higher EBIT margin vs. expectations drive 4% EPS beat; Weak poultry volumes impact sales growth
- ARL reported H1 17A sales at ZAR 5.8bn, slightly below y/y and 4% below ACe (ZAR 6.0bn), driven by very weak volumes in poultry (-10.5% y/y vs. -2.5% ACe) after reduction in IQF brining limits to 15%.
- EBIT decreased 51% y/y to ZAR 212mn, 8% above ACe (ZAR 196m). Astral’s increased poultry selling prices by c. 11%, aiding the Poultry division to post slight operating profit (+0.5% margin vs. -1% expected), driving a 4% HEPS beat.
- Overall, the results look neutral given Astral was able to pass through higher prices to consumers, however, weak volumes and higher imports continue to impact sales growth.
Astral Foods is a poultry producer. Co. is engaged in manufacturing of animal feeds, broiler genetics, production and sale of day-old chicks and hatching eggs, breeder and broiler production, abattoir and further processing operations and sales and distribution of various key poultry brands. Co. has four broiler production, processing, distribution, sales and marketing operations, which include: Festive (Olifantsfontein), County Fair (Western Cape), Goldi (Standerton) and Mountain Valley (Camperdown). Co. has three operating segments, Poultry, Feed, and Other Africa.
Established in 2007, Arqaam Capital is a specialist emerging markets investment bank, bringing regional and international product offerings to the emerging markets. Arqaam Capital combines international best practice with expertise in the markets in which we operate. Our primary role is to provide financial intermediation and create investment opportunities for frontier and emerging markets investors looking to invest in their own markets and abroad, as well as international investors seeking opportunities in target frontier and emerging markets. Arqaam Capital is headquartered in the Dubai International Financial Centre (DIFC), with additional offices in Libya, Lebanon, Egypt, and South Africa.
Arqaam Capital's research platform provides the largest coverage footprint of MENA equities and one of the largest on the African continent with a total of 300 stocks under coverage. Arqaam Capital is ranked as one of the leading research providers in the region - a reflection of its broad coverage universe, its in-depth and high quality research, as well the compelling investment ideas that the team generates. The analysts closely analyze their sectors and issue in-depth company and sector research while the strategy team connects the micro with the macro, focusing on index analysis, macroeconomics and strategy research.
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