Quantum Foods earnings tumble almost 80% as input costs, avian flu bite

Chicken and egg producer Quantum Foods reported that headline earnings fell over 70%, after a year of steep input costs, avian flu outbreaks and rising energy costs.

On Friday the animal feeds and broiler chicken company said headline earnings per share (Heps) crashed 78% to 12 cents per share in its 2022 financial year to end-September.

Headline earnings fell 73% to R28 million, compared with R102 million in the prior period.

The group said it had experienced exceptionally challenging trading conditions, citing a combination of factors such as sharp increases in raw material for animal feed, and further outbreaks of avian flu in the country.

January saw a bird flu outbreak in its Lemoenkloof layer farm in the Western Cape, which it said affected operations for the rest of the financial year. As a result, as many as 400 000 hens had to be culled.

Its Lemoenkloof farm supplies about 13% of the company’s total production of eggs.

It started repopulating the farm in July.

“Insurance for the HPAI outbreak on the Lemoenkloof Farm was limited to the risk associated with direct losses resulting from the culling of infected flocks and did not cover the further effect of lost production and lower sales volumes experienced,” said Quantum Foods.

Its eggs business was also hit by reduced selling prices for eggs and reported lower margins on the back of a weak consumer environment. It also had lower demand for layer stock, the company said.

The company said it was unable to recover significant increases in the cost of feed raw material and other operating costs from customers, especially in the layer farming, eggs and Ugandan businesses.

Added to its woes, were significant increases in electricity, gas, and fuel costs as well as load shedding cycles. It also had to contend with harsh weather conditions in the Western Cape.

Revenue rose 11% to just over R6 billion while operating profit dropped 78% to R33 million, down from R148 million previously.

Quantum’s share price took quite a knock on Friday, falling 9.6% to R4.52 after the results were published.