Rainbow Chicken’s improved profitability continued at the halfway stage of its financial year as a host of positive metrics worked in its favour and its turnaround strategy continued to bear fruit.
However, the group, which listed on the JSE in June 2024 after completing its unbundling from RCL Foods, said the industry needed urgent support from the government to access export markets, particularly the breast fillet market.
Headline earnings per share (HEPS) for the six months to end-December jumped to 35.64c from 2.46c a year ago.
The group cited consistent operational improvements, better agricultural performance, enhanced efficiencies and a disciplined focus on cost management, together with lower commodity pricing, as drivers of the results.
The reduction in costs related to load-shedding and avian influenza delivered a combined positive benefit to the company, it said on Friday.
Revenue was up 8.9% at R7.89bn largely due to an improved sales channel mix, focus on product mix management and higher volumes.
Earnings before interest, tax, depreciation and amortisation (ebitda) more than doubled to R581.1m while attributable profit leapt to R317m from R21.03m before.
“While Rainbow continues to take significant strides in implementing its strategy of becoming a market-leading, low- cost chicken producer in SA, available free cash flows are currently being invested to grow the company’s infrastructure platform,” it said.
For this reason, the board resolved not to declare an interim dividend.
With a strong balance sheet and improved farming production practices, Rainbow’s focus remained on advancing the “Brilliant Basics” strategy for the second half of the financial year, it said.
While the high cost of living for consumers continues to be a concern, there are encouraging green shoots emerging in SA. It cited the gradual lowering of interest rates and a level of political stability as providing some prospect for economic growth and reduced pressure on consumer spending.
These developments boded well for sales in the second half of the year, it said.
“The threat of avian influenza during the winter months is real and Rainbow will continue to manage an extremely focused biosecurity regime,” it said.
SA is yet to find an optimal response to this threat, with specific reference to compensation and vaccination strategy, it added.
Rainbow said one of the five pillars of SA’s poultry master plan — developed in partnership with the government and several industry stakeholders and signed in November 2019 — is to expand the market and support exports.
“However, there has been little progress in this regard and the industry requires greater and more urgent support from the government to access export markets, particularly the more lucrative breast fillet market,” it said.
Imported chicken from various parts of the world, largely Brazil, the US and certain EU countries, continued to disrupt the local market. Though imports of bone-in portions had declined in recent years, imported products continued to compete for market share, representing as much as 20% of local consumption.
It highlighted the inefficiency of SA’s rail system, which remained an impediment to lowering the cost of distribution of raw materials such as maize.
The work conducted by business and the government to improve the country’s freight logistics network must be prioritised and driven at the highest levels, the company said, to ensure the reform needed for SA to have a competitive supply chain.
Reducing costs across Rainbow’s strengthened integrated value chain, where those could be controlled, remained a focus area, it said.
The company’s shares closed down 2.9% on Friday at R12.75, giving it a JSE market capitalisation of R129.76bn.
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