Following its separation from RCL Foods earlier this year, the first financial results have been published for Rainbow Chicken Ltd as an independent business.
Presented in the report are information and commentary extracted from the financial statements published by RCL Foods in September. Covering the fiscal years ending June 2023 and June 2024, they are intended to provide Rainbow shareholders with direct access to the results of Rainbow.
Overall, the company sees its improving results driven by the ongoing execution of its turnaround plan.
Among the headline figures are a 7.9% increase in revenue for the year just ended to more than 14.5 billion rand (ZAR; US$837 million). This is attributed to a combination of a greater volume of sales through retail and wholesale channels, as well as higher selling prices.
Profitability has improved significantly. From ZAR29.8 million for the year to June of 2023, Earnings Before Interest, Taxes, Depreciation, Amortization and Impairments (EBITDA) for the latest 12 months was just under ZAR630 million. As a result, EBITDA margin improved by 4.1 percentage points from 0.2 to 4.3% over the same period.
The company attributes these positive developments to a range of factors. It mentions improvements in agricultural performance, processing yields, cost management, sales prices, volumes sold through retail and wholesale channels, lower feed ingredient costs, and a more reliable power supply.
Avian flu costs hit Rainbow’s bottom line
In contrast to these positive developments in its business, Rainbow Chicken put its costs due to highly pathogenic avian influenza (HPAI) over the year just ended at almost ZAR203 million.
The financial impact arose mainly from the need to import hatching eggs, higher feed costs from extended flocks, safe disposal of culled birds, and additional cleaning and disinfection processes.
To reduce the risk of an outbreak in its breeding birds, the company swiftly relocated its Midrand breeder farm to an area of lower poultry density.
It appears that Rainbow opted not to participate in a government-backed vaccination program. While supporting the program in principle as a means to protect South African flocks, Rainbow judged it to be too complex and costly to implement for its birds.
Future prospects
Consumers in South Africa continue to be under financial pressures, and commodity prices remain at high levels by historic standards, the company notes in its report. However, performance by Rainbow Chicken for the coming year is expected to continue to benefit from continued improvements in agricultural performance and expanding sales.
Meanwhile, the company is set to focus on adjusting to its separation from RCL Foods.
At the end of this month, audited results are scheduled to be published for Rainbow Chicken. These are expected to differ from the financial statements when Rainbow was still part of RCL Foods, and to include a reconciliation of these differences.
More on Rainbow Chicken
As part of RCL Foods, Rainbow Chicken was the second largest poultry producer in South Africa — and the African continent. Production amounted to around 197 million chickens in 2023, according to WATTPoultry.com’s Top Poultry Companies survey.
Over a period of time, RCL Foods unbundled its chicken business, and Rainbow Chicken was listed on the Johannesburg Stock Exchange on June 26 of this year.
