It also anticipates improved trading conditions in other African countries it has business in.
Quantum Foods’ head office is located in Wellington in the Western Cape.
In November 2017, the group, which has integrated egg and broiler businesses, as well as feed manufacturing operations, reported an increase in revenue of 4% to R4bn (US$ 331m) in the year to end of September.
In a trading update for the first four months ending 31 January 2018, released yesterday (February 5), Quantum said the favorable feed raw material cost position of the business continued into the first four months of the 2018 financial year.
However, gains were partially offset by further Avian Influenza (AI) losses that occurred in the Western Cape layer farming operations.
“External feed sales volumes grew by 11.7%. This compensated for the decline in the feed requirement from the farming operations of the group.
“The decline in feed in the layer farming operations was caused by the lower hen numbers due to AI and in the broiler farming operations by the lower feed consumption achieved per bird reared,” according to the group’s financial statement.
Tailwinds for egg business
The egg business experienced significant tailwinds in the period. “Compared to the first four months of 2017, average selling prices per dozen increased by 32% and egg production costs were lower due to the decline in feed costs.”
Egg sales volumes declined by only 5.6% due to AI production losses, but the profit effect of the improved margins is expected to be substantial for the first half of the financial year.
Quantum said production costs decreased in its three other African businesses following the decline in feed raw material costs. This factor, together with stronger demand from the market for day old chicks and eggs, should result in improved margins and profitability for the first half of the financial year, added the company.
While it expects a favorable outlook for the remainder of the financial year to 30 September 2018, Quantum said profits could be dented by additional AI cases in the group’s large bird production facilities. Profit could also take a hit if there is any change in the cost of feed raw materials, either due to lower than expected grain crops in the 2018 harvest season or due to a change in the value of the Rand against the US Dollar that impacts maize and soybean prices.