Astral Foods delivers strong FY2025 earnings despite fragile broiler margins

Key topics:

• Revenue, earnings and dividend sharply higher

• Broiler margins still thin and vulnerable

• Bird flu, feed costs and load shedding remain risks

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BizNews Reporter

Astral Foods Limited delivered a significant improvement in financial results for the year ended 30 September 2025 (FY2025), reporting substantial growth in earnings and a major increase in dividend payments, supported by volume recovery and sound cost management.

The Good: Financial and operational recovery

The integrated poultry producer achieved a 10.4% increase in Group revenue, rising to R22.6 billion from R20.5 billion in the prior year. This growth was attributed mainly to increased broiler slaughter volumes and sales in the second half of FY2025 (2H2025), coupled with a recovery in selling price realisations following earlier deflation.

Profit before interest and tax (PBIT) increased by 10.9% to R1,247.4 million. Crucially, when excluding the R251.6 million once-off insurance recoveries received in FY2024, the underlying operating profit demonstrated a robust year-on-year increase of 42.8%. This underlying growth was driven by sound cost management and higher production volumes, which helped reduce overhead production cost per unit.

The performance translated into strong returns for shareholders. Earnings per share (EPS) grew by 16.2% to 2,276 cents, while headline earnings per share (HEPS), a non-IFRS measurement, increased by 14.2% to 2,193 cents. Furthermore, the Group resumed dividend payments, declaring a final dividend of 880 cents per share, resulting in a total dividend for the year of 1,100 cents per share—a 112% increase over the prior year.

Financially, the Group focused on rebuilding its balance sheet, ending the financial year with over R1.0 billion in cash. Cash generated from operating activities rose by 20%, bolstered by working capital improvements of R276 million, primarily within the Poultry Division. The Feed Division was a key driver of profitability, reporting a 31.1% increase in operating profit to R713.8 million, with its operating profit margin improving from 5.5% to 6.6%.

Operationally, broiler slaughter volumes rose to an average of 5.8 million birds per week (up from 5.4 million). The broiler net margin showed a significant turnaround, recovering from a dismal -1.1% in the first half of the year (1H2025) to +3.9% in 2H2025. Additionally, total poultry imports decreased by 20.1% during the year, largely due to import prohibitions resulting from bird flu outbreaks in exporting countries.

The Bad: Risks and margin vulnerability

Despite the significant financial recovery, the results highlight several persistent risks and areas of concern. While the Poultry Division’s underlying operational performance improved by 52.6% when excluding insurance proceeds, the reported operating profit for the division declined by 8.1% to R533.6 million, due to the comparison with the prior year which included substantial insurance payouts.

The most critical ongoing challenge remains the thin margin structure in the poultry sector. The total broiler net margin for FY2025 was reported at just +1.5%, which management noted remains "extremely thin and vulnerable to any headwinds".

Cost pressures also impacted performance, including R161.2 million incurred in diesel generator related and other costs directly stemming from load shedding disruptions. Feed costs remain the key driver of profitability, constituting approximately 66% of the live cost of a broiler. While soya meal prices decreased, SAFEX yellow maize prices increased year-on-year by R560 per ton to an average of R4,552 per ton.

Looking ahead, the Group faces significant macroeconomic and sector-specific risks. Bird flu is cited as a major risk, showing alarmingly that it may no longer be a seasonal disease. Furthermore, the subdued economic growth outlook in South Africa, constrained by structural challenges and high unemployment, is expected to continue constraining household disposable income and pressuring consumer spending on food. International trade dynamics also pose a threat, as the expiration of AGOA preferential trade access led to a 30% USA imposed tariff on South African imports, creating negative economic consequences. The ongoing Competition Commission poultry market inquiry adds regulatory uncertainty.

In summary, Astral Foods delivered a structurally improved operational and financial performance, demonstrated by strong cash generation and dividend growth, yet remains highly exposed to thin margins and persistent local sector risks, especially bird flu and high input costs.