South African poultry major Astral Foods, which posted its first annual loss on Monday (20 November), has pledged to rebuild its balance sheet in the next quarter.

The business, which has been buffeted by headwinds including power outages, or load-shedding, bird flu and high feed costs, told analysts of its plans in a meeting following results the company described as “the lowest point in Astral Foods’ proud history”.

Astral Foods’ bid for recovery – following its recording of a loss of R512.2m ($27.8m) in the 12 months to the end of September – is centred on what the company describes as Project 3R – to re-set, re-focus and re-start the business. Without providing details, Astral Foods said its plans centre around “various initiatives to normalise the business post the load-shedding disaster”.

CEO Chris Schutte, who admitted he was a “bit embarrassed” by the results, told analysts: “The first objective is to rebuild our balance sheet to its former glory.”

Bird flu “remains major risk”

But he warned the problems the company has faced have not gone away.

Load-shedding, or blackouts in the energy supply, have affected multiple food businesses operating in South Africa this year.

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Power outages in its abattoirs led to a backlog in Astral Foods’ slaughter programme, while an outbreak of the H7N6 strain of bird flu in July meant Astral lost 40% of its breeding stock.

Schutte said load-shedding – which forced the company into using generators – and bird flu took R2bn from its bottom line.

Looking to the future, he said: “Bird flu remains a major risk. It will be with us for quite a long time.”

He added: “Running generators is [also] going to be with us for a long time.”

On a more optimistic note, Schutte said the cost of feed crops, such as maize, which have increased 20% year-on-year, has eased which is “positive news for livestock producers”.

Schutte said Astral Foods has not been able to recover costs through pricing actions because of the country’s economic problems.

“Things are not going well in the country. The country is broke at present,” he said.

He added: “We live in a country where the consumer is under huge strain and there is very high unemployment.

“People don’t have discretionary, disposable income to pay more for things.”

Asked by an analyst about having to deal with “a mess” not of its own making, Schutte said: “A vast amount of money over a number of years has been spent duplicating infrastructure that was supposed to serve us.”

He added: “This could have been spent on infrastructure, on capacity, efficiency improvements [and] creating jobs.”

The publicly-listed company’s annual loss of R512.2m is the first time it had moved into the red “in its 23-year history”. A year earlier, Astral Foods posted a profit of R1.05bn.

It ran up an operating loss of R620.9m, against an operating profit of R1.44bn the year previous.

The company’s revenue stood at R19.25bn, versus R19.33bn a year earlier.

Its poultry division – which makes up more than 80% of its revenues – dipped 0.8% on the back of a 9.6% decline in volumes.