South Africa’s largest poultry producer Astral Food is to spend up to R120m on water supply infrastructure at its production facilities to mitigate the potential disruption in supply by municipalities.
There is a severe water shortage in many areas, including Johannesburg, with more businesses becoming concerned about disruptions to operations. Astral — which owns brands such as Goldi Chicken and County Fair — said it was busy with feasibility studies, specifically at Olifantsfontein near Midrand, where it has a processing facility for its Festive brand.
“Water supply disruptions are of concern, as these have become commonplace with emergency supply measures being costly,” Astral’s outgoing CEO Chris Schutter said.
You can generate your own electricity, but you can’t create water. So a lot of focus at all our plants for alternative sources to mitigate the water situation
— Chris Schutter, Astral’s outgoing CEO
There is enough water with good rains but infrastructure is an issue, he said. Compared to electricity shortages, “a water crisis is a different story”, he said. “You can generate your own electricity, but you can’t create water. So a lot of focus at all our plants [is on] alternative sources to mitigate the water situation.”
If it weren’t for the capital expenditure the company made at its facilities to mitigate water supply cuts, especially reservoirs at Olifantsfontein that gave the plant an additional two days of water usage, “we would have been down much more than what we’ve been in the past”, Schutte said.
“It is a concern. We had to buy land adjacent to our abattoir or processing facility and build reservoirs just as a backup. And now we’re looking at further plans to have longer-term water, buying water from a farm, build a pipeline, bring it there. The same in Standerton, [Mpumalanga].”
The plan is to have a direct water line from the Vaal River to its plant.
Five years ago, Astral suffered losses after water shortages in Standerton, as poor delivery of water and electricity by the local municipality affected operations. The company successfully took the municipality to court over this issue.
In the year to September, Astral costs relating to water supply were R14m down from R17m last year.
Astral has reported significantly improved results for the year to September with revenue up 6.4% compared to the prior year at R19.3bn, lifted by the recovery of the poultry division from a loss-making position to a profit for 2024. An operating profit was R1.1bn, up from an operating loss of R621m in the previous year. It attributed this mainly to the absence of load-shedding and bird flu-related costs during the year.
Revenue by the Poultry Division increased 7.7% to R17.1bn, driven by an increase in broiler sales volumes. During 2023, the demand for Astral’s poultry products slowed on a change in the product basket, the load-shedding disruption on operations forcing the company to cut back on production to balance supply with demand on a weak macroeconomic environment characterised by constrained consumer spending.
During the year to September, broiler slaughter numbers were back to the 5.8-milllon per week norm.
Astral sales volumes increased 4.6% [representing 21,449 tonnes] for the year, positively affected by an increase in fresh and quick service restaurants (QRS) sales volumes. Astral supplies restaurant chains including Spur, Hungry Lion, KFC, Nando’s, Wimpy and Steers.
Famous Brands said last month there had been a high demand for chicken meals on its menus. Astral said while there had been an increase in its Value-Add/QSR segment from 5% in 2023 to 7% in 2024, the quick-service restaurant sector was still struggling.
Schutte said Astral had spare capacity at its plants to grow volumes. “It’s a nice position to be in. We can most probably do another 600,000 birds per week without spending capital. That bodes well for us in the near future.”
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