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Johannesburg – Astral Foods [JSE:ARL] said on Monday it expects a "tough and uncertain 2011", but said it has considerable confidence because of its past success as a low-cost broiler producer.
The poultry producer said in its 2010 annual report that continuing job losses and SA's high unemployment rate - which is in excess of 25% - would take their toll on consumer confidence and spending power.
Chairperson Jurie Geldenhuys said the firmer rand and higher imports of poultry products were likely to aggravate an oversupplied market, keeping margins under pressure.
The rand has in the past week traded at its best levels in more than three years, after touching R6.56/$.
Astral's activities include the manufacturing of animal feeds; the breeding and selling of day-old chicks and hatching eggs; abattoirs; and the sale and distribution of various poultry brands.
Geldenhuys said that despite the risks posed by unemployment and high debt levels, the global economy should grow at more than 4% in 2011, driven mainly by China and India.
"In all likelihood, food inflation will catch up with commodity prices, which should lead to higher food prices in the year ahead," he said.
Astral said favourable feed input costs from which it benefited last year might be changing.
It said the local price of yellow maize has substantially lagged the international price of maize since October 2007. Thiis is partially the result of the stronger rand and a bumper local maize crop in 2009-2010, which forced local prices down to export parity levels.
"It is, however, conceivable that this relative weakness in the local maize (price) is unsustainable," Geldenhuys said.
Conditions similar to those experienced in 2010 were likely to prevail in its poultry business. Local broiler production for 2010 grew by an estimated 4% compared to 2009. Total imports grew by 13% over the same period.
"Despite market growth, an increase in per capita consumption was driven largely by lower selling prices.
"A downturn in market conditions linked to higher industry stock levels for most of the year resulted in an extremely competitive sales environment," Geldenhuys said.
