Rainbow Chicken’s interim earnings have doubled as the group benefited from strong demand, lower input costs and the stronger rand.
The group said on Wednesday revenue increased by 11.3% to R8.8bn in the six months ended December, driven by enhanced channel and product mixes and improved pricing.
Attributable earnings increased by 111.2% to R669.5m, with headline earnings per share rising to 74.81c from 35.64c before.
The group said the ongoing implementation of its growth strategy and focus on operational efficiency and cost management contributed to improved profitability.
An interim dividend of 15c per share was declared — its first interim dividend since publicly listing.
In its chicken division, revenue increased by 11.5% while earnings before interest, tax, depreciation and amortisation (ebitda) rose 126.2%.
Over the past two years, Rainbow has doubled its processing capacity at the Hammarsdale facility, introduced new technologies and continued to improve its core asset base.
In its animal feed unit, feed costs remain the largest component of poultry production costs and have a significant impact on the overall competitiveness of the business.
Revenue increased by 1.7% driven mainly by higher volumes across internal and external channels, though selling prices were marginally lower than the previous period, largely reflecting reduced commodity input costs. An ongoing focus on operational efficiencies, together with strategic raw material procurement, resulted in an incremental improvement in ebitda, it said.
Rainbow invested in key capital initiatives during the period, including enhancements to processing and farming equipment, biosecurity investments to control avian influenza, the upgrade of the grandparent hatchery, investment into water filtration systems and the start of phase two of the IT separation project, as part of Rainbow’s transition from RCL Foods’ platforms.
Water and energy security remain key strategic focus areas for the business, and capital investments are being planned over the next five years to secure reliable and affordable supply.
Rainbow said progress has been made on South Africa’s 2019 poultry master plan, developed in partnership with government and industry stakeholders to expand the market and grow consumption.
“There is, however, still much urgent work to be done to enable and support meaningful exports,” it said.
Significant uncertainty remains regarding the African Growth and Opportunity Act (Agoa), which has now been reauthorised by the US for a limited period until the end of 2026.
“The concern from the industry is that a 72,000-tonne chicken quota, exempted from anti-dumping duties, remains available to the US, while South African industries do not benefit from Agoa anymore, given the more recent and volatile tariff environment.”
The overall cost and conditions of the government’s avian influenza vaccination drive remain prohibitive for the table egg and chicken industries, and discussions are under way with the authorities in an attempt to remedy the situation.
Looking ahead, Rainbow says risks include the impact of US tariff policies, volatile input costs, challenging South African trading conditions and the effect of the Middle East conflict on the business environment.
Avian influenza remains a threat to the industry, and the group has proactively invested in upgrading key facilities and enforced strict biosecurity protocols to help mitigate the risk of any potential outbreaks.
The group’s separation from RCL Foods is almost complete, with the transition of a few key internal services expected to be finalised by the end of June.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.