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Daily Newsletter

27 September 2023

Daily Newsletter

South Africa poultry, egg supplier Quantum Foods issues bird flu-linked profit warning

The company has pointed to the prospect of an earnings per share loss for the annual reporting period ending this month.

South Africa poultry and egg supplier Quantum Foods has warned of a potential loss linked to an outbreak of bird flu.

The Wellington-based business said highly pathogenic avian influenza (HPAI) has been detected at “several” broiler farms in the provinces of Gauteng and North-West, which is located on the border with Botswana.

As of 21 September, Johannesburg-listed Quantum Foods said the financial impact on its chicken flock is currently estimated at R106m ($5.5m) as the company pointed to prospects of an earnings per share loss for the annual reporting period ending this month.

Around 1.5m layer and breeding birds have so far been infected with HPAI, Quantum Foods said, adding the financial impact of bird flu on the country’s poultry industry “is not yet known”. Much will depend on the volume of available eggs going forward, the Nulaid brand owner said.

Quantum Foods’ farm in Lemoenkloof, Western Cape, was also hit by bird flu in April, affecting around 420,000 layer hens.

However, the company added in a stock exchange trading update: “The impact of this further HPAI outbreak on the company’s operations to date appears to be confined to the northern parts of South Africa and the company’s operations in the Western Cape and the Eastern Cape are currently unaffected.”

The business, which claims to be South Africa’s largest egg supplier, warned both headline earnings per share (HEPS) and earnings per share would likely turn to a loss in the year to 30 September because of the HPAI outbreak.

HEPS of 14.1 South African cents reported last year is expected to be wiped out, or 100% lower, Quantum Foods explained. Similarly for EPS, which will also be “at least” 100% lower than the 12 cents print in the previous fiscal period.

“A further trading statement will be published as soon as there is a reasonable degree of certainty as to the likely range within which the company’s HEPS and EPS is expected to decrease,” Quantum Foods added.

Quantum Foods’ bottom-line earnings were also pressured in the year to 30 September 2022. HEPS was down from 52.2 cents in the corresponding period of 2021 and EPS declined from 53.9 cents.

Revenue last year was R6.02bn, up 11%, but operating profit dropped 78% to R32.5m.

Profit before tax was R20.3m, sliding from R142.3m a year earlier. Net profit sank to R23.8m from R105.8m.

The dairy and soy food sector will see rising demand for lactose-/gluten-free products

GlobalData estimates that the global dairy & soy food sector will grow at a CAGR of 17% during 2022–27. The healthy eating trend has encouraged consumers to seek alternatives to traditional dairy products. Plant-based dairy alternatives are often perceived as healthier due to their lower saturated fat content. Moreover, increasing awareness about food allergies and intolerances, coupled with consumers’ interest in alternative diets, will drive manufacturers to launch lactose- and gluten-free products.