Morning, everyone, and welcome to Astral Foods Limited's interim results presentation for the six months ended 31 March 2026. This year, we celebrate Astral's 25th anniversary of being listed on the JSE. On this momentous corporate event, together with the sterling results we are presenting today, by the way, the best in 25 years, is a testament to the group's growth through determination, resilience and a strong management team. A special welcome to our Chairman, Dr. Theuns Eloff, and Non-Executive Director, Bridget Bareham. We also introduce Johannes Geel this morning as new CFO. He joined the group on 1 March 2026. Just a couple of housekeeping rules. After the presentation, we'll first take questions from the floor. Then those online.
If you would like to ask a question, please click on the request to speak icon on the right side of your screen, or you can leave a message on the tab at the top left of your screen, and I will pose those questions to the management team. I will now hand over to Gary and Johannes to take us through the presentation.
Thanks, Marlize, for those kind words. When I arrived this morning, the audio visual team said, "Are you sick again?" I said, "Yes." It's like it happens every six months. I won't mention bird flu because it looks like if you mention those two words, everyone starts panicking. This is a case of swine flu. Welcome, and welcome to Johannes, a seasoned agricultural veteran. He's, as you know, spent many years with AFGRI. Certainly understands the landscape and welcome, Johannes, and look forward to your support today. As usual, we'll go through the presentation, then we'll take questions at the end. Stock standard agenda. Nothing much has changed here. We will look at the business broadly, the results for the six months and operational overview. We'll take a deeper dive into the various divisions within our value chain.
Talk a little bit about industry matters, topics of the day, and what's happening in the industry. Johannes will take you through the finances, and then we'll cover the outlook and try and color in a little bit of context here. Maybe calm one or two nerves, but we'll get to that later. In general, Marlize has reported already or expressed that the results for this six months certainly stand out there as a top result for 25 years that we've been listed on the JSE. Certainly something we're proud of. ZAR 1.2 billion profit for the six months. Nothing to be shy of at all. Off a very low base in the comparable period, of course. Profits at about ZAR 271 million. Nevertheless, a very good result, and there's a couple of key drivers behind that result, and we will touch on those through the presentation.
Headline earnings per share, ZAR 23.18, up from around ZAR 4.09 on the comparable period. Of course, cash. We've spoken a lot about cash the last couple of years. Critical in our business, particularly in a business that does experience volatility from time to time. You know that we were on a build a balance sheet phase for a couple of years. Closed last year with ZAR 1 billion in the bank, we still have ZAR 1 billion in the bank, even though we've had to pay the tax man his big fair chunk. Dividends in January. Robust CapEx program. Johannes will cover that all later in the cash flow.
Cash looking strong and, on that and a bit of forward looking, we have declared a dividend two times cover ZAR 11.60 per share, bearing in mind that the full year dividend payout last year was ZAR 11, and that's certainly been one of the highest dividends that Astral has paid to shareholders. We talk a lot about poultry feed costs. You've heard me tell you many, many times before that poultry feed makes up 70% of the life cost of producing a broiler. Certainly our largest input cost by far. When maize prices and protein prices, the key ingredient there being soy meal decrease, that only serves to soften your feed input costs.
We'll cover that in some detail in two slides to follow on what exactly happened on SAFEX over that period of time and how we procured those key inputs. On-farm broiler performance is very good. Once again, reaching an average all-time high for the PEF on good genetics in the Ross 308 bird. You'll see some more detail on that later. Certainly our farming performance is very good, with the team producing excellent results on the farm. As we've said before, our focus remains on ensuring that we get the basics and the fundamentals right in the business, make sure that that's intact. Any impact in that area of our business, you cannot necessarily or you cannot fix in the selling price. Delivering the best live cost to the back door of the abattoir is absolutely essential. Our broiler production increased.
We alluded to this last year, November, where we said that by the end of that month we would be slaughtering close on 6.1 million birds a week. That did materialize, we continue to slaughter on average 6.1 million birds a week. I must remind everyone that we came off an average of about 5.4 million birds a week in March last year. I think the first uptick the birds we placed was for processing on the 9th of March. We went to 5.8 million birds a week and then to 6.1. Pleased to say that we've maintained those production volumes through the business with stock still in good balance and certainly, no concerns there. Poultry selling prices were firmer.
If you remember or cast your mind back to the comparable period in 2025, we came off a significant deflationary environment at that time with selling prices for frozen chicken under severe pressure. That had largely to do with the number of dynamics in the market at that time, and we were unable, with stock levels in the country to get any higher pricing. That corrected itself over the past year, allowing us to recover input costs and of course, recover inflationary costs in our environment. That selling price certainly supporting good performance for the period under review. This slide, as usual, tells the story. It shows the movement in profitability through the comparable periods. You'll see that ZAR 271 million that I alluded to earlier on, not a good performance for the first half of 2025.
There were reasons for that. You can see the contribution to the ZAR 1.2 billion profit that has been posted for the first half of 2026. One might ask, well, with all the increased broiler production volumes, why only the small contribution there from volumes? Well, in the comparable period, you will recall we sold a lot of chicken out of stock. Over that time where prices were quite depressed in the market, that festive period at the end of 2024, we sold a lot of chicken out of stock. Sales volumes up 1%. A small contribution there from volumes, largely the correction in price, of course, softening in feed prices that have assisted the result. It really reflects very well that deflationary environment and selling price that we experienced on a comparable period.
You can see the trend in selling prices at that time. In that first half of 2025, prices under severe pressure, even lagging the increase in the food inflation or the inflation in the food basket, bearing in mind that chicken is in there as well, tends to pull that number down a bit. Recovery in selling prices. At the moment, this is a function of mix. It's not a drop in selling price. It was a function of mix in February, January and February, when there was quite a bit of tertiary products or offal in the market. Exports were quite high in that category. It's not unusual over January, February season to go into the new year after festive period where everyone has been eating well, that the industry carries higher stock levels of tertiary products.
Some impact there in the average NSV, but certainly not that we went across our basket with a price decrease. You can see nevertheless that that pricing is on average the same as it was in December 2023. Certainly the correction in selling price coming through and we were pleased that we were able in this environment to get that through to the market and recover input costs and return a decent margin to the business. This is a slide that not many people show. We've shown it. We're transparent with the results. This is the broiler net margin. You can see the comparable period that we compare ourselves today, -1.1% at that time. I said to you that that is not a sustainable margin. There's no business that can survive making losses.
Just read the newspaper every day you will see the case studies that are out there for that. Certainly we had our work cut out for us. We had to get a reasonable price for our product basket and get the selling price up. You can see that selling prices assisted margin recovery. The big impact has actually come from this decreasing feed price, the green line there. You can see in certain periods of time, and we say quite basically, if the trend in the poultry selling price outstrips the trend or the decrease in poultry feed input costs, you make good margins. You can see that over time where those lines come close together, decent margins. Where they diverge, this was a terrible load-shedding period, so not something we can probably compare ourselves to.
You can see when these trends move closer together, margin. When they move apart, impact in the business. This certainly assisting the margin opportunity that was captured in the business. As you know, we've always said that if there's one graph that I could put up today without putting them all up, and Anthony knows this, I see he's smiling. He uses this graph and so do a number of other people. It's this one. This tells you the picture. This is the change in the broiler selling price year-on-year, month-on-month, against the change in the feed price year-on-year, month-on-month. If this doesn't tell a story, then nothing will. You can see in 2018 when we had the softening in feed prices and we had support for poultry selling prices in the market. The same thing has happened here.
Softening in feed prices, support for selling prices. You can see that this, although the movement year-over-year still positive, slightly down there, and that we can say in Astral price, because this is our data, it's our own data, is just a mix effect. That if you go and track this picture and you overlay the profitability in this business, isn't it, you can see the volatility that comes through in earnings. On the raw material front, of course, very important in our lives. If we take a quick look at the South African balance sheet for maize. We are currently about 4% or 5% into the season's harvest and expecting to produce a very good crop. That is well known.
The harvest a bit delayed by the late rains, with the drier, colder weather now, certainly the farmers are just finishing off the soybeans and they will make even faster progress with the harvest of the maize crop. You can see that a 16.8 million ton crop on the cards for South Africa this year. We'll talk about that later because that provides certainty, a lot of certainty on our near-term prospects for the feed price. This is a very good crop. SAFEX is still trading above export parity pricing. I see yesterday on September yellow maize contracts trading about ZAR 300 above export parity. There is still some work to be done here. If we're going to trade local fundamentals on this crop, we should see better prices on SAFEX.
We all know that next year there's this talk of a El Niño developing and a drought. That is still very far away. That's a year away. If we don't export this crop, and if you have a look at it, even with over 3 million tons or 3.4 million tons plugged in there for deep sea exports, we will still have a very healthy carryout on this crop. This will only serve to protect our maize supply in the country, even if we have an El Niño year next year. Remember, an El Niño doesn't necessarily mean we will have crop failure. It depends when the rain falls. South Africa has had crops through an El Niño year, where rain fell at the right time, and you can still produce a 13 million, 14 million ton crop. Not unheard of.
2 million tons carryout yield, the surplus, if we don't export it, great, we'll keep it. We may need it, but certainly a very healthy crop for this season. Astral has covered our positions well. As I stand here today, we have 4 .5 months left of this financial year. Of course, having a neutral or well sort of covered position, a neutral position, we know what our feed price is for the coming months. This is a story of maize. Very difficult to beat the maize price in a falling market. All you can do is buy it as it goes down. That's what we did. Bought it as it went down. February, the Middle East conflict started, a bit of turmoil there, oil prices jumping. That obviously has a bearing on ethanol demand in the U.S.
Corn has increased a little bit, close to $5 a bushel. The Rand, we've seen volatility in the Rand. SAFEX always takes a bearing of what happens on the international market, a bit of volatility in the maize price. We're actually trading just above ZAR 3,500 a ton. I think it was ZAR 3,590 a ton we closed on September yesterday, yellow maize. Not necessarily bad levels given where we've come from. ZAR 5,000 a ton wasn't too long ago there on the charts. This has been a great story as well. Soy meal, you just buy it. The price has come off highs of ZAR 13,500 a ton, and you could flat buy soy meal anywhere around ZAR 7,000 a ton, if not lower.
Certainly these two inputs assisting feed price considerably and with the good farm performances, our life cost for the first half on a comparable period improving. This is the rand. Our market does take a mark of this. With the volatility right now, it's very difficult to say where this should land or where it should be. I think the world is in a little bit of turmoil. You can see that as soon as the first bombs dropped, this is what happened to the rand. Nevertheless, within that environment, we still have to manage our procurement well. We watch this very closely with our Procurement Committee and with the technical and key inputs from our service providers and our internal team. We have performed well in this area in procuring our soft commodity inputs. Quickly on the divisions.
The Feed division, good story to tell here. Revenue flat, although feed volumes were up. This is just a function of the selling price. With soft commodity inputs coming down, maize and soy, selling prices dropped by about just close on 10%, 9.8%, with volumes up 9.8%. Revenue flat in the division, but operating profit up 23%, up to ZAR 366 million for the first half. A very good performance here from the Feed division. Margins at 6.9%. It's a difficult number to look at, or keep track of because it's impacted by whatever happens here on the revenue line, which is driven largely by feed price at the end of the day. Expenses down. To reduce your expenses on a ZAR per ton basis by 1.3% is no easy task. You need to have a firm grip of your costs in your feed mills.
You need to push the volumes through those feed mills. Certainly the increase in bird numbers at Astral has assisted us to push higher volumes through these plants. All that does is really assists in recovering those overhead costs and the rand per ton margin increasing for the period. We've covered some of this just to highlight again. Yellow maize came off highs of over ZAR 5,000 a ton in a comparable period. Soy meal offering very good opportunity to the market. Internal feed volumes increasing by 11.1%. That's driven by the increase in the broilers that we produced in Astral. External feed sales volumes also increased by 8%. We sold more feed into the commercial layer sector, table egg sector, and into the dairy sector. A good performance from the Feed division to achieve that.
We have already highlighted the very good expense control in that division. The mix, somewhat unchanged. As you know, we on average supply about 60% of our feed internally, with the balance into the external market. Never forgetting that of this 33%, about 25% of our sales goes into the dairy sector. A very important industry for us and we're supplying good volumes both in the Eastern and Western Cape into those industries. Poultry division. Revenue. This was driven by the recovery and selling prices, with selling prices up 9.5%. That equates to ZAR 3 a kilo. I think during the year, last year in the May roadshow, November, we alluded to the recovery and the selling price that we saw through the year. We've had stable poultry selling prices now for close on 8 months. No volatility in that pricing.
Stable price, just obviously some mix effects that come through that you've seen in the earlier slide. The ZAR 3 a kilo recovered all in last year, with a small increase taken, the last increase in September last year, and that was to cover inflationary increases in costs that we have from 1 October, that being the start of the new financial year. Certainly, something there that has supported the results. With the volumes up and the numbers going through our processing plants and efficiencies intact, the cost base in this division has only increased marginally below inflation. Again, volumes through these plants assisting in the recovery of overhead costs. Of course, that feed price down 9.1%. That was about ZAR 790 a ton. Has certainly assisted the margin opportunity or provided margin opportunity in this division, which the team has done very well to capture.
Margins in poultry here at 8.4%. We have spoken a lot about a couple of these points on the slides. The only one I want to talk to you very quickly is the poultry stock levels. At 31 March, they were higher than 30 September. At 30 September last year, we sat on very low stock levels, almost skeleton stock, hand to mouth, which isn't a sustainable environment to operate in, particularly when service delivery is very important to our customers. Our stock levels are good at the moment, and if anything, still below model stock, so no cause for concern there. Johannes will show you later that that did have an impact on working capital that was invested into stock. In this division, we did get some benefit from sales mix.
You'll see a slightly higher proportion of frozen there sold into IQF single portions. Of course, on higher volumes to sell the same amount of fresh as a proportion of the mix, value added and QSR all assisting the NSV in the business. Certainly, the sales mix going some way to supporting the result in this division with some, in the future, some exciting opportunities here. Really all we're going to do is work towards building capacity in some areas here that will assist the mix. On the agriculture side, a good story to tell. I've already alluded to the good farming performances. We did sell more parent stock out of Ross Poultry Breeders for the period. A number of producers in the industry increased their placements on higher production numbers.
It's important to point out that the broiler industry produced just over 23 million birds per week in October and November last year. That's an all-time high for the South African poultry industry, and certainly no shortage of chicken supplied to the market. The local industry, once again, stepping up and ensuring that the demand that we've seen in the market was well supplied. Of course, demand for chicken has been strong. I think that the beef and the pork story with foot and mouth disease, swine fever, now foot and mouth disease in the pork industry, unfortunately, the shortage of beef has assisted the poultry demand, with some retailers commenting that they have seen a switch out of beef into chicken. Breeder revenue increased. We sold more day-old chicks in that external market.
A highlight there is we also picked up on our exports of day-old chicks and hatching eggs into the various African markets. National Chicks putting in a good performance there. Feed input cost decrease. We've spoken a lot about that's really as soft commodity prices fell. You can only buy that market, the feed prices came down. Astral received approval. The last time I stood here, we told you we were vaccinating one farm. We have subsequently received approval, we've vaccinated five large broiler breeder farms now. Going into winter, that equates to about 30% of our breeding stock, certainly provides a measure of protection that wasn't there going into our past winter. Bird flu is a global phenomenon. It's not just a South African issue. We still have biosecurity. The fundamentals in the business are unchanged.
We still practice good biosecurity, and vaccination is just another tool in the toolkit that allows us to add a further layer of protection to our breeding stock. These are the performances. Average daily gains here, very good. This is all-time high, with the birds achieving over 58 grams per bird per day. Slaughtering a heavier bird at the same age, more or less. This was an hour or 2 difference here, but a heavier bird. That weight you've really got out of the same feed and the same period of time that it's taken to grow that chicken. That is also weight that goes through your plants and assists in the recovery of those costs. PEF. We only cover 10 years in this graph, but it is an all-time high. There isn't a result that exceeds that. Very good result there.
Mortality slightly up, and this had a lot to do with the growth rate of the birds. At altitude, we must be mindful, we're still farming at altitude. Growth rates of the birds were very good. Mortality, slight uptick there, but we got weight for the age, and then the feed conversion more or less flat year-on-year but achieving heavier birds. Industry matters. I'll cover this very quickly and then hand over to Johannes. We've spoken about this. You've seen a lot in the media, SAPA talking about it, the spike in imports. This is not necessarily alarming because there was a recovery in volumes from Brazil when they were closed down to exports because of their bird flu. You have to consider that in this number, there was some recovery in volumes which stopped at that time.
MDM, which makes up anywhere between 50%-60% of the imports, is a product that we use in value-added meats in this country and we don't produce a lot of. MDM, although part of the total import basket is there, and at this time there was a shortage of MDM in the market. You can see that import levels have, through the festive period, did spike. We did see an increase in frozen bone and portions and offal at that time, and it was those tertiary products that also served just to put some pressure on local selling prices for the tertiary products or mala. Based on industry statistics, the six months, October through to January, the industry has slaughtered on average 22.3 million birds a week. The last production report that we have out of SAPA was dated January 2026.
Imports average 43,000 tons per month. On the comparable period equaling about 26% of total consumption. The AGOA poultry import quota, you may have read about this in the newspapers. Quite frankly, the quota should not have remained in place when the U.S. introduced import tariffs. SAPA has taken this matter on legal review. The DTIC, through Minister Tau, should have removed it. They chose not to. We believe it may have been used as a little bit of a bargaining tool in the negotiations with the U.S. Not even the extension that was granted to AGOA actually supports the continued AGOA quota free of the anti-dumping duty. The U.S. tariffs were still introduced and around the 2015 negotiations, terms and conditions agreed at that time that if any tariff regimes or measures were introduced, curbing or placing tariffs on South African exports, then the quota would fall away.
That is currently on a court roll. Then we have requested an update from the Department of Agriculture and Trade and Industry. They granted some self-regulation to the U.S. last year around their bird flu disease status and management on exports. That expired at the end of March, and we haven't heard anything further from our Department of Agriculture, but we are chasing that up with them. I'm now going to hand over to Johannes to take you through the financials in more detail. Thank you.
Thank you, Gary. Good morning, everyone. If I have to take you through the income statement, and I will try not to actually duplicate some of the stuff what has been already touched on this morning. We really try just to show a couple of things what is different. If you look at the revenue, I already said it's ZAR 11.9 billion versus a prior year of ZAR 10.7 billion. Also operating profit moved to ZAR 1.214 billion and a profit before tax, ZAR 1.229 billion, and profit for continued operations sitting just below ZAR 900 million. Headline earnings per share, you can read it all there, HEPS, ZAR 23.18. If you move to the next slide.
This is quite a busy slide, I think a couple of things I would like to highlight here as well is if you look at the right-hand side there, you will see that actually it was the best six months in history. We talk about a margin of 10.2%. If you do a calculation for last nine years, you will find that the average was 6.2% as an operating profit margin. Coming from a very low in the last year for the comparative period of six months of 2.5%. The group six months operating profit. This is quite an interesting slide, as already alluded to by Gary. A couple of things work quite nicely for us at this point in time, especially if you look at the red line on the right-hand side moving above the green line.
That is when you actually have a perfect circumstances for good profit. You will see the same happening in 2018 when the same happened actually there. You will see it there as well, is that's when you have an increase in the poultry selling price is above the decrease in the broiler feeding cost. This is a good slide explaining the difference also between feed as well as poultry. You can see there's quite a nice positive movement from the first six months last year in the poultry division coming from a ZAR -26 million to a positive number of ZAR 848 million. On the balance sheet. Equity ends at ZAR 5.977 billion. Let's call it ZAR 6 billion for the time being. Non-current assets moving by 3% to just below ZAR 3.5 billion. Net working capital is up by 19% from ZAR 2 billion to ZAR 2.4 billion.
I will call this an investment, and on the next slide, I'll actually take you through some of the detail in my reasons for saying so. The net assets moved from ZAR 1 billion to ZAR 1.152 billion. Our non-current liabilities you will see is more or less in line with prior, but a little bit down from ZAR 294 million to ZAR 256 million. Capital expenditure. Depreciation, ZAR 186 million versus the prior year number of ZAR 159 million. Total cap expense so far is ZAR 205 million compared to a prior year of ZAR 109 million. Outstanding commitments, ZAR 112 million versus a prior year of ZAR 157 million. If I add outstanding commitments to the total CapEx, you will find it's ZAR 317 million for the current period versus the prior year number of ZAR 266 million.
Working capital. If you look at the working capital, it's up by, let's call it ZAR 400 million for now.
Inventory poultry being up from ZAR 682 million to ZAR 970 million. The trade receivables up from just above ZAR 2 billion to ZAR 2.153 billion. I call this an investment in working capital. Why do I say so? Gary has mentioned earlier on that actually Our stock numbers was quite low at the end of September. We have to actually invest in some of our stock numbers just to make sure that they actually do stick to our service level agreements. At this point in time, I can also confirm what we produce is what we're selling. We have to do that. There's no stock building. Other payables move up from ZAR 396 million to ZAR 462 million. I can also just confirm, because you might say that the debtors are up from ZAR 3 billion to ZAR 2.153 billion, that is as a result of a higher turnover.
I can confirm that our debtors book is quite clean, clear, and there is actually a very quality debtors book. The cash flow movement, we've already been touched by Gary. We're starting with an opening balance of just above ZAR 1 billion, ZAR 1,013 million. There was an inflow from cash operating profit of ZAR 1.476 billion. As always, there have to be some outflows as well. Reinvestment in working capital being ZAR 418 million. We have to pay the tax man ZAR 357 million. We also have to invest in our CapEx of ZAR 205 million. We have to pay a healthy dividend to our shareholders of ZAR 342 million. A very small number. This is a closing balance of ZAR 1,152 million. It's an improved cash balance from last year, from just over ZAR 1 billion to ZAR 1,152 million.
In summary, I'm not going to repeat what has already been said. Operating profit ZAR 1.2 billion. Capital expenditures, ZAR 206 million. The guideline for ourselves is we should see that we spend more or less about ZAR 500 million up to the end of September. Still a bit of money to be spent in CapEx for the next couple of 4.5 months. As already mentioned, the interim dividend declared of ZAR 11.60. Compared to last year's first half of ZAR 2.20, second half of ZAR 8.80, brings us to a total of ZAR 11 to the prior year. With a 2x cover now brings us to ZAR 11.60, which I think is quite a healthy dividend at the point in time. Thank you very much.
Thank you, Johannes. Appreciate covering that for us. Probably to the slides everyone was waiting for. If I read the room yesterday, it seemed as though people have taken what we said in our press release and panicked a little bit. I just want to cover this in a little bit more context. We've always provided balance in our closing remarks and our outlook, and we have always been transparent, and we have always been realistic about the future. Of course, it's nothing new if you read the newspapers these days to see that the world is in a little bit of trouble with the Middle East conflict. I mean, the surge in fuel prices around the world has impacted South Africa and the consumer here as much as it's impacted everyone else. We will talk about that in the next couple of points.
Bird flu, which we have said before, remains a risk to the local industry, is that it's a disease that is spread by wild birds. If you've got very good biosecurity, it's not spread by your own people, and it's not spread by equipment. If you keep the wild birds off your property or out of the poultry sheds, then you've got a good chance of keeping the disease out. That's exactly what we do with biosecurity. I mean, the beef industry has learnt a very hard and fast lesson about animal movement control or the lack thereof, and the impact that's had on their industry, the lack of biosecurity. I mean, just driving onto some dairy farms, it's only now that they realized, "Well, let's put up a spray race at the gate and disinfect vehicles coming in." You'll visit one or two wine estates.
We recently, a couple of months ago, and with a knapsack sprayer spraying your wheels of your car because they've got beef they want to protect or livestock to protect. That has started to surface in the beef industry. Poultry industries, we've been managing bird flu since 2017. Now, obviously it's an invisible enemy. It's not something that you can fight off. You can if you've got good biosecurity. That's all we can do, is continue to implement the best levels of biosecurity that we have available to us. Yes, high infection rates in the northern hemisphere are a risk because there you've got migratory bird routes. Again, that doesn't necessarily mean that a disaster awaits the industry. Time will tell. There's been one or two worrying signs.
There was a seal in the Cape last week, I read in the newspaper, that was infected with H5N1. There's been a couple of commercial poultry flocks this year that have confirmed cases. Small farms. It's there, but it's something we've, I think learned to manage and continue to manage well, and that is with very strict biosecurity. The Iranian conflict and the surge in oil prices have translated into higher fuel and transport costs. I think you read that in the newspaper every day about the potential impact on the consumer inflation. The inflation outlook is not new. We read that recent unemployment stats, I think, hit a high of 32.7%. That environment places the consumer under some pressure, and we put it out there because it is what the environment serves up at the moment.
It doesn't necessarily mean that the consumer can stop eating or afford food right now. The spike in fuel prices and fertilizer costs has been flagged as an issue globally. We've got a planting season coming up in October, November, December. Of course, any shortage in fertilizer can increase costs. That may just add some further pressure if there is a drought next year, which we talk about in the next point. Again, if the situation resolves itself in the Middle East as quickly as it started, I think there can be some recovery and turnaround as soon as freight starts flowing again and oil starts flowing. I think like everyone, we keep a close eye on the developments there and the ongoing discussions between the U.S. and Iran. Is there a likely drought? Well, that's what the forecasters say.
You wouldn't say so if you look at the weather now over the last couple of months and how wet it's been. I think the amount of rain we've had going into winter now will do two things. It'll provide very good planting conditions for the new crop in October. The soil moisture levels will be good. If there's any drier weather, certainly I think that'll help get the crop off to a good start. Again, it completely depends when the rain falls. This point can only impact a crop that hasn't even been harvested yet or would only be harvested in a year's time. A lot of water to flow under the bridge still. Of course, as I said earlier on, given this large crop that South Africa is about to see at 16 million tons, could even be 17 million tons.
For the near term, there is no panic around raw material input costs. As I said earlier on, for the balance this financial year, we've already covered. The uncertain global landscape with heightened geopolitical tensions could lead to an economic slowdown with some currency and soft commodity volatility. That we've shown you in the charts earlier. We must navigate through that. It's not new. Our procurement team is seasoned. They look for the signs. We get a lot of input from very experienced people, and we base our procurement strategy on a number of factors and always have a very balanced view to how we procure soft commodities. We try and navigate that volatility as best we can. South Africa is set for this record harvest. They're only about 4%-5% through the harvest, the figures I saw yesterday. Still a lot of maize to come in.
This will lead to stable poultry feed input costs over the short term. Our broiler volumes are at 6.1 million birds a week. We have no plans to reduce that. The volumes assist our base cost to produce a strategy and certainly go a long way with good plant efficiencies to supporting the performance that you've seen out of Astral here. If anything, we have our eyes set over the next couple of years on how to grow the business, not how do we look at cutting it back. Astral's bird flu vaccination program has made good progress. This will provide some protection to our breeding stock. Remember, we came out of 2023 with no insurance cover for bird flu, no compensation from government, and just biosecurity. We now have vaccination.
30% of our breeding stock, as I stand here today, almost 750,000 broiler breeders have been vaccinated, and our veterinary team has done very well with that. They've done very well in implementing the protocols that were published by the Department of Agriculture around vaccination for bird flu. It does come at a cost. One has to weigh that cost up against what we used to have as an annual insurance premium we paid for insurance, or weigh it up against the possible cost of losing livestock to bird flu. A lot has been said the past six months about the cost of vaccination. I guess it depends on what your barometer is.
Having been through bird flu a few times and facing the consequences of those losses, vaccination and well-managed and implemented vaccination has a place in poultry production, as does vaccination for many other avian diseases. Our balance sheet is healthy, this will continue to support key strategic investments. There will be an expansion of manufacturing capabilities and growth opportunities. We cannot sit still and be satisfied with where we are today. We must look at growth opportunities and we have a good couple of opportunities on the radar for Astral. Good news for the industry is some revival, I want to say, because it's been a long time since the Poultry Oversight Committee around the Master Plan met. However, that committee met a few weeks ago on one of our contract producer's farms, and a phase two of the Poultry Sector Master Plan was signed.
You will see from the reports afterwards that government and various stakeholders again have confirmed their support to improve or increase local production of poultry. Make sure that where that predatory trade doesn't take local production away from us, and support the expansion of the producers in the industry and emerging farmers. That's a good news story for the industry to tell, because certainly phase one of that Master Plan supported investment and capacity. That's where Astral's growth came from. 2020, in 2019, we signed the Poultry Sector Master Plan and confirmed our commitment to investment. That time we spent close on ZAR 1 billion expanding our capacity by 16% by 800,000 birds a week. Look where we are today, producing 6.1 million birds a week. Certainly looking forward to the next step in our journey. That's the outlook.
A balance between what we see today would be negative factors that are out there. They can have some bearing on the near-term prospects. Near term, probably more medium term, I'd say, than short term. I think we need to be realistic that the situation in the Middle East is in some of sort of flux. As of today, we haven't passed on the diesel price increase through to the market. It's a very difficult conversation to have, particularly with the consumer under so much pressure, given the rising input costs just in transport. We're very cognizant of that. Our customer base are sensitive to food inflation. We have to be cognizant of that. We have to be slightly circumspect that it's not easy, because it's always a difficult conversation, but you can make the price what you want it.
At the end of the day, you've still got to sell chicken. Still got to balance all the costs in the business. You've still got to balance your investment and working capital and stock. We look at this on an ongoing basis, and right now we're comfortable that we've done the right thing. But it's a conversation that we'll keep having with our customers. It's not a cost that any industry can carry forever. I don't think there's any environment that works like that, where input costs from suppliers keep piling up and then someone doesn't or can't recover those in the market. We've had packaging suppliers walk in with increases based on the oil issue in the Middle East. Everyone has got a business that they need to look after. We will make any necessary decisions on that as and when we deem it necessary.
That is the outlook, balanced. We thank you for your attention today. We appreciate your interest in Astral and your support. It has been an honor to present these results today, been a very strong set of results for the company. On that, it's not a one-man show. This is a team effort. To the Astral team out there, good job. As always, keep it up and we look forward to the next round. Thank you.
Can I say something before we go to the?
Questions
Questions? I have two things to say. I'm mandated for the one and I'm not mandated for the other. I'm mandated by the Board. They actually gave me a directive because we know Gary and Johannes and others here of the Cape team don't blow their own horns. We thought that we should just share with everyone that the board has a high appreciation for what the whole management team did, not just the head office, but in all their regions. It's true that often these things, and that's Astral's issue, you don't have control of most of those things. Often you've got a tailwind, you have a beacon. Even if you have a tailwind, you have to manage properly. I think their on-farm efficiencies, both in poultry and feed, pays tribute to that. As a board, we wanted to say congratulations.
Some of you, the older ones will know that Chris, there was some slides, and Chris always pointed out that he joined there. It was a low point, and then Astral went up. Gary and Johannes, hopefully in 10 years' time when I'm not here anymore, can say, "Well, we joined there and we kept up that level." Thank you, Gary.
Thank you.
Johannes, team, guys of the Western Cape and others here. The thing I'm not mandated to say is that we as a Board, I often think, and I hope no one will take umbrage to this, a Board works almost like sex in a marriage. If it's good and it works, you don't even notice it. It's one of the things in your marriage. However, if it doesn't work, if there's a problem, then it can break your marriage. The same of a Board. We put a high premium on a seasoned board, on continuity, on a culture. We recruit Board members not only with skills in mind, but also with cultural fit. Because you know and I know that you make one mistake, you appoint a wrong chair or a wrong audit committee member, and you've got trouble.
We just wanted to say to those shareholders that are here that we were, at the beginning of the year, confronted with some of our shareholders saying, some of us are senior. King decided that from King IV, where the independence was measured in 12 years, it now became nine years. We were faced with a situation that three of our Board members, which is half of our NEDs, would have had to resign. We said, "No ways. We're not going to do it. It's not in the interest of the company." King has always been comply or explain. Now all of a sudden, it's just comply. We think it's nonsense frankly. We have now put measures in place for a proper succession plan a little bit earlier than we had planned.
I think it's important that shareholders just know this, and we will also, before the AGM next year, communicate specifically on this to shareholders. Because we believe that although a board is in the background, as I said about a marriage, if you're worrying about the oil price and fretting about it every day, it's there. Not a lot we can do about it right now, so we'll keep managing what we manage, and that we'll give you our assurance of. Marlize, are there questions?
There are a couple. Are there any on the floor that would like to ask first? Okay, then we'll go onto the online questions. Kyle Gilham from Bateleur Capital. "Can you please explain the increase in administrative expenses from ZAR 495 million last year to ZAR 788 million this year?
Because Johannes is new, I'll let him answer that question.
Thanks for the question. The biggest reason for that increase in admin cost is as a result, we do have a bonus policy. Seeing that we actually have done quite well, I have to stick within those rules and regulations, and I have to provide for additional bonuses. That's the main reason for that increase.
Thank you.
Astral's HR policy incentive framework, our team has complied with the guidelines there and provisions were raised, which obviously reflect in that fee. Bearing in mind that last year with the result, well, there was no provision for that in the first half, off a very low base there.
Thank you. Raj Ambekar from Excelsior Capital. "Do you expect pressure on poultry selling prices due to the lower input costs or imports with the strong rand?
My immediate answer would be no. With the fuel price increase now, I would say two months ago, there was a conversation around selling prices and when will the feed price reflect in selling price. The market knows very well that there's a lag. There's about a 5 to 6-month lag before that lower maize price actually comes through in food prices. That has been quoted in the media from the retail sector, and that's well understood. There was a question posed at the time to say, "Well, when will we start seeing this benefit?" Of course, the outbreak of that war and the increase on fuel costs, which we're absorbing. SAFEX has rallied off its lows of February. We fortunately have had good cover, so not completely exposed to that.
There was a time where we just sat out the market and didn't participate in that spike after the February events. It's an ongoing conversation. Difficult to say when will that come to bear, because right now we're absorbing a cost. I think in doing that, doing our bit for the industry and for retail and for the consumer, more importantly. We've had stable poultry pricing for seven months. The situation could turn around as quickly as it started, and then you want to try and avoid the volatility in pricing. The customer knows what they're paying for chicken, and they see that on shelf.
Thank you. Grant Davids from Aegis . Good morning. Thank you for the presentation, and congratulations to the team on the results. Could you please elaborate on your plans to make adjustments to the sales mix, and what areas specifically you intend to grow, and will it require additional growth CapEx?
Sure. There's always opportunity within the mix, and I think one must be cognizant of the fact that the QSR sector is growing. Some of the participants there are growing. We have customers in that area. We support their growth.
They require capacity to be brought online, which means we have to make an investment in that capacity. We also actively have a number of value-added products that have been developed in our value-added or further process range. For example, some products, some fully cooked products. Always looking to support the supply of those into the market. Product innovation is something that we're working hard on. What I don't want people to think is we completely want to change our sales mix. Our anchor, our foundation is frozen chicken. It does not mean that we can't exploit opportunities in the balance of the mix.
The conversation around the second phase of the Master Plan has been to look at the export market, and for that you will need capacity, fully cooked capacity, to export to Europe or the Middle East, and certainly we'll be making an investment in that over the next one year to 18 months.
Thank you. Sivuyile Ngalwa from Visio Capital Innovations. With increase in climate, biosecurity, and geopolitical risks outlined in the outlook statement, how is Astral leveraging King IV Principle 10 to ensure sustainability-related operational data such as biosecurity monitoring, feed input volatility, climate risk indicators, and supply chain resilience metrics are governed with sufficient quality assurance and decision transparency to support strategic decision making and stakeholder confidence?
King IV Principle 10. Johannes, can you help me? Astral, I've got to remember the question now, we look at the business every single day and all the metrics and drivers behind this business. We understand them, we hope, get them more often right than wrong. We're farming with livestock, biosecurity is critical to our business. It is non-negotiable. We have very strict policies around biosecurity. It's a risk with many diseases, not only bird flu. We tend to focus on that in recent times because it's topical. We've been managing certain disease risks in the business for many years. In the 1970s and 1980s, Newcastle disease was just like bird flu. Everyone hang their heads and ran away because they didn't know what to do. The disease was brought under control, we vaccinate for it.
There are so many factors out there that do come into play. Geopolitical risks, they have a bearing on the rand, they have a bearing on soft commodity pricing, they have a bearing on the oil price. There's certain things, again, that we can control and those we focus on. Put all our energy into that. There's certain things we can't control, and those we will manage with inputs from a broader team. As I said, the procurement committee is not one person. It's not one guy that wakes up in the morning and says today, Okay, he's going to buy maize today. We have a procurement committee with seasoned professionals. They make a strategic call. We agree on a strategic direction, and there's a team, execution team of three people every day that will decide whether today is a good day to buy maize or not.
We stick to the principles that have worked for us for many years. Within the frameworks, whether it's King or our own internal policies and biosecurity policies and procedures, we will manage the business. Certainly, again, there's some things you can do something about, there's some things you simply have to manage in an environment like everyone else does.
I can maybe just add if you don't mind. We also have a session about five, six weeks ago, looking at what is reportable and what we should report on. I think in the near future, we will have some sort of indication what is important for Astral to manage and to report on, and we'll review that.
ZAR 3 per liter increase would mean we have to recover about, and this is approximately ZAR 0.05 per kilo in the selling price. One can do your sums. The diesel price impact is quite high, at ZAR 13 a liter, approximately the increase between April and May. I don't want to say it's manageable, but we have absorbed it. Certainly wasn't there before. At the end of the day, it's our responsibility to balance the books. For now, the conversation with the retailers has been certainly one where we are not looking right now to take that increase. Again, we can't carry this forever. I don't think you can expect any business to. It's something that we'll review every day. If there's any relief in the fuel price, all of a sudden that requirement to review selling prices diminishes.
Last month, April was the first increase. Everyone was literally in a state of flux. Probably still is. Looking at a bit of a wait and see game. We have a responsibility to run a good business. We'll make a call on that when we feel it's necessary, if it's necessary at all.
Hello-
Sure
Yeah. Gary Shaw here from Ashburton.
Can you give us a bit of an update on what's happening with the Daybreak Foods assets? I know you have potentially out the business rescue process or the liquidation process there may be certain assets within that portfolio that may come to the market, et cetera. Would that be something that Astral Foods would be interested in? Maybe if you can just give us an update on what's happening with the Daybreak Foods assets.
I don't want to sound like I'm cagey. In broad terms, look, offers were called for by the business rescue practitioners for all of the assets or part of the assets or a strategic equity partner. There were, as far as I understand from what I read in the press, like all of us, three offers received. We, of course, as I've said before, we're looking at the assets. From that date in January, there's been no meeting of creditors, so I have no idea what's happening there. I believe some offers have lapsed. I hear now that further money was raised through the UIF and Government Pension Fund on behalf of the PIC, and that money has been invested to restart one of the plants. That's what we hear.
Well, that will be a lengthy startup because anyone who's been through those assets can testify to the condition that they find themselves in, and there's a lot of regulatory frameworks that need to be put in place before they start up again. That really revolves around management of effluent, water use licenses, and every other Food Safety Act compliance measure that would be required, et cetera. They're still standing. There's nothing being produced through them. They are still hatching some chicks through the hatchery. We have still been doing business with them, supplying feed, some parents also buying some chicks from them. We have a clean book with them. We do see the BRP team from time to time. They still are looking for, we believe, a strategic equity partner.
I think what the PIC said in the media most recently, which hasn't been confirmed by the BRP team, was that they were looking for a 60% equity partner, someone that could invest or inject capital into the business. Well, yeah. Good luck. We've got our own business to look after, and we've got opportunities that exist within our business before taking on other troubles or those sort of troubles. Thanks, Shaw.
Hi, Gary. Pemba here from Excelsior Capital. Just wondering whether you guys would be willing to pay a special dividend this year or would you be sort of looking to hold onto the cash in case conditions get worse?
We're mandated by our board to hold a certain level of cash on the balance sheet, and we're well positioned for that. Thank goodness we did when we went into 2023. We had a good, strong surplus cash balance. One needs that. I think you need that in the poultry industry to see you through any periods of volatility. We have a healthy balance sheet right now. As I stand here today, bank balance very healthy. We do have a robust CapEx program. This year, we gave some guidance at the end of last year on our CapEx spend this year. It will be higher than last year. Some necessary replacement to do, and we have to look after, take care of the assets. There's some opportunities to expand in the business, and we will provide more color to those in good time.
Certainly, we have cash to invest. We do have a very good pipeline of good projects. Projects that can improve efficiencies, reduce cost. A good example is the water pipeline in Standerton to our Goldi processing facility. It is a grudge purchase. There's ZAR 120 million we need to spend, but it reduces our cost of doing business. Instead of trucking some of the water up and down and facing water supply disruptions from the municipality, we can secure long-term sustainability of water. Then one on the back of that, decide how we expand that business. To pay a special dividend now is certainly not on the radar. I mean, the board looked very carefully at our forecast. We have got a stated 2x cover. ZAR 11.60 dividend is a healthy cash outflow of about ZAR 450 million that we're paying out next month.
The cash flow has to look after that, which we comfortable will. We'll assess where we are at year-end. We do know that we need to reinvest in the business. After 2023 and 2024, where unfortunately we went through some trial and tribulations there. We have got some CapEx, big CapEx projects at that time, and I talk about big and I talk about one like the pipeline that were put on hold. At some stage, we will do them and, of course, we will need cash for that. The board has structured, we've got a revolving Teresa's spoken about it before, revolving credit facility. We ring-fence facility we've raised for important capital projects with a ring-fence income stream. Of course, we've been mandated to hold cash on the balance sheet. We'll have to balance that all up at the appropriate time.
Thank you. Anything you want to add, Johannes?
No, nothing.
Okay.
Maybe just one thing. I think the capital project we are looking for has a good payback period. Some of the things I've seen in the last four or five weeks is more or less between two and three and a half years of payback, which I think is an excellent investment.
De Wet Schutte from Bateleur Capital . Can you please provide guidance on the expected working capital movements for the second half of the financial year post the rebuild of inventory levels in the first half?
Yeah. I would just quickly touch on and then Johannes can-- As I've said in the presentation, we will maintain our production volume. With that, having said that, we obviously will keep a very close eye on stock. One doesn't want to build stock whilst you do that, being mindful that going into winter. We didn't see this last winter because there was very good consistent demand for frozen chicken. Time will tell what happens this winter. If the environment doesn't change much around beef and pork and there's a strong demand for chicken, even within this environment where we're producing higher numbers in the industry, we still selling production and we will endeavor to do that for as long as possible. Working capital is we've invested in higher sales, higher volumes. Our stock was incredibly low at 30 September last year.
Low, in fact, that it was almost uncomfortable. We've had to reinvest back into working capital, and I don't envisage that changing too much over the next couple of months. Johannes.
Thanks, Gary. I think if we look at it all depends what's going to happen on the selling price, first of all, because that will have an impact on your debtors outstanding. Secondly, it depends on what's going to happen on SAFEX, because that will have some sort of an impact on your valuation of your raw materials/your final product. What I've penciled into my calculations is to have more or less a similar number in working capital as we have at the end of September. Which means it should be, I wouldn't say neutral, because that sometimes you can't say it, but I've penciled in more or less on the same levels and very close to being neutral, maybe a little bit up and down.
Tyson Govender from Truffle Asset Management. Hi, Gary and Johannes. Congratulations on a good set of results. Two questions. The potential El Niño impact. What crop level next year would be needed for local SAFEX prices to move from export parity to import parity pricing, given expected carryover stocks and assuming our exports stay constant?
I don't know. There's a lot of drivers there that can drive. You won't see, certainly not with the crop we're harvesting this year. If anything, we're looking, moving closer to export parity. There are shipments booked, and we can do deep sea exports up until I think it's June, July. There are slots booked. They haven't priced yet. I think there's some work to do for SAFEX to move towards export parity levels for us to export surpluses that there are in this market, and there will be on this crop. If those surpluses don't export, well, then they're there and they can assist us if there is an issue with the crop next year. It's a big if, and it's still well over a year away.
People are talking about an El Niño, but we've also seen in years gone by that doesn't necessarily mean. Anthony, you've covered this market for many years, it doesn't necessarily mean that there will be a disaster on the crop. It have to rain at the right time. As I said, I think the planting conditions we're going into this year will be good. With all the late rain. Let's see. Yeah.
The second question, distribution cost is a large number on your income statement. Assuming we see higher and longer diesel prices for the next year, how much pricing would be needed to offset the increase? Do the current supply and demand fundamentals allow for you to take any price increases?
I gave a sensitivity earlier on. I said every rand and a liter increase in the diesel price is about ZAR 0.05 per kilo in the selling price. In the Feed division, we endeavor to recover that increase in the diesel price. It's a variable cost and a transport rate that we charge out on our feed. That's recovered. The difficulty is on the poultry side of the business where you can't go immediately to the market through third-party distributors and everyone else and just recover that from retail. It's a conversation that is already out there, but obviously, one has to be very cognizant of the consumer environment. Again, we need to balance the books.
It's no good forcing the price because you should or want to build some stock, and then you will pay storage costs on chickens sitting in a freezer. Those are sums we do every single week to make sure that we know exactly what is happening in our cost base. We've been there before. If you build stock quickly and you've got stock sitting in frozen storage, that can cost you ZAR 20 million-ZAR 30 million a month in storage costs. It's not a science, it's an art. We've got to manage the cost base. We have been looking at that, and for now we've absorbed that cost and I would say for April, comfortable to do that and we will keep a close eye on it.
Thank you, Chris Logan from Opportune Investments. Congrats on both your 25th anniversary and the great results. Are the local farmers still profitable with these lower maize and soya prices?
At these levels trading today, yes, they are profitable. Marginally, they are profitable. What's profitable? I think if you go to Nampo, you'll see the largest collection of airplanes and helicopters. I think they're profitable. They're doing pretty well by the looks of it. I rocked up in my Toyota Corolla and got stuck in the mud. The maize farmer flew over me and landed on the airstrip. I think they're doing well.
That's funny.
Yeah, they are. We keep an eye on that. Our suppliers give us those break-even thresholds for maize farmers in the west, maize farmers in the east, and we look at that as well. Maize farmers are, I think they're born to plant. They need cash flow, so they will plant, they will produce a crop, and they are making some money. If anything, they want to protect the upside that's currently there, because if they carry the surplus into next year and there is an issue with the crop next year, they've got this maize. Farmers these days have ability to store quite a lot of maize on their farms. They hang on to it hoping that the price will go up. Doesn't always, but they will need to sell it sometime.
Thank you. Mawande Nkoane from All Weather Capital. Given how strong the balance sheet is and the levels at which the share price is trading, a deep discount, would you-
No. I think we've covered this many times. We see more value in investing back into the business.
Yeah.
Certainly not in buying back shares now to try and prop up the share. The share price must do its work. We saw, and again, I think there was an honesty and transparent conversation we have. Yesterday's drop in the share price was a bit of a surprise. I think the market has looked at the outlook and said, "Oh, everything's gloomy." I hope I've provided more context today. We've got work to do with the cash, and certainly we can do good work with it, investing it back into the business with some of the projects we have. Johannes, anything you would like to add?
No, Gary, I agree with you. I would buy back of shares and rather invest in opportunities/capital investments with a good return.
Those will be to the longer term benefit of our shareholders if we do that.
Correct.
Not to the short-term benefit of a shareholder.
Thobeka Nkqubo from Mianzo Asset Management. Good morning, thank you for the good presentation. Given the foot-and-mouth disease, how has the demand for feed from the beef farmers been?
It's been fine. We've actually, as I said, it's not only a risk to beef farmers. The dairy industry are obviously very nervous about it as well. We've increased our sales to that sector over the past six months. In fact, we've stayed very close to our customers there and assisting them with biosecurity. Perhaps all the lessons we've learned out of managing bird flu are equally important on their farms. I must say that vaccination for that disease probably should have happened a lot sooner than it did. I'm not a beef farmer, so I'm not going to repeat what they've said. Certainly, that program must be escalated and they must bring it under control. We haven't seen any drop in feed volumes or any credit risk from that sector.
If we've taken on a new customer, dairy customer, we've done our own assessments of the risk on farm, and we haven't got any issues.
Thank you. The last question from Warren Riley, Bateleur Capital. Can you give us direction regarding the poultry margins tracking similar or better than first half trend?
Well, that would be a forecast which I'm not really allowed to do. We've got an increase in input costs in diesel and transport. We didn't have that in the first half. Again, we've covered our feed prices for the balance of the financial year. We know what our feed price is. If we can hold on to selling prices, more importantly, sell what we produce. The results will reflect that environment. In an inflation environment like this with fuel, we'll have to take that, as we've said, month to month. I can't stand here right now and tell you the margin will be X. I'm not allowed to, I think.
Thank you, Gary. There are no further questions.
Thank you very much, Marlize.
Thank you.
Thank you for your time and attention. It's been a long one, a lot of questions, but we really appreciate your attendance. For those here today in the audience, thank you for that. Then behind the camera, there's a lot of people as well, and we thank you for all your time and patience. Thank you