Major South African chicken producer sends a warning to government

Rainbow Chicken has seen a massive rise in earnings due to an ease in load shedding but warns that avian influenza (bird flu) is still a material risk to the group, adding that the government has to do more.

Rainbow is a fully integrated broiler producer that plays a major role in the national supply of chicken. It processes, distributes and markets fresh, frozen, value-added, and further-processed chicken products.

Rainbow’s Chicken Division produces and markets products under the well-known Rainbow, Simply Chicken, and Farmer Brown brands.

Rainbow was listed on the Main Board of the JSE on 26 June 2024 and unbundled from RCL Foods on 1 July 2024, making its results for the six months ended December 2024 its first set of interim results.

The group’s publicly available results were also very strong, with revenue from operations increasing by 8.9% to R7.9 billion. However, it was the earnings figures that showed massive growth for the company.

Earnings before interest, taxes, depreciation, amortisation and impairments (EBITDA) went up 119.0% to R581.1 million.

Earnings per share (EPS) is 35.58 cents, up 1,407.6%, and headline earnings per share (HEPS) of 35.64 cents, up 1,348.8%.

“The financial performance was driven by consistent operational improvements, improved agricultural performance, enhanced efficiencies and a disciplined focus on cost management, together with lower commodity pricing relative to the comparative period.”

“Further, the reduction in costs related to energy load shedding and Avian Influenza delivered a combined positive benefit to the Company in the current period.”

The group, however, warned that bird flu remains a risk to the business, with it taking notable steps to manage this.

Apart from culling a substantial number of breeder birds in the prior year, Rainbow extended the breeder flocks and imported eggs to mitigate the risk of chicken shortages in the market.

Moreover, the company relocated its Midrand breeding facility to a less densely populated region closer to Rustenburg.

The geographical separation of the facilities has helped to reduce the bird flu risk to the business. Biosecurity enhancements have also reduced the chance of outbreaks, mainly in breeding flocks.

“While the Government has provided a protocol for bird flu vaccination, the cost and conditions are
prohibitive for the table egg and chicken industries and require urgent reconsideration by the State.”

Nevertheless, the group said that the positive momentum of Rainbow’s turnaround strategy and improved profitability has continued in the first part of the financial year.

Revenue growth was largely attributable to an improved sales channel mix, a focus on product mix management and higher volumes.

The group said that it continues to take significant strides in implementing its strategy of becoming a market-leading, low-cost chicken producer in South Africa.

With this in mind, the group’s available free cash flows are being invested to grow the company’s infrastructure platform.

The board of directors thus chose not to declare an interim dividend for the period.