Business

Rainbow Chicken’s cracking results

One of South Africa’s largest chicken producers expects a significant jump in earnings for the first six months of its 2025 financial year thanks to a turnaround strategy that is set to see its earnings rise over 1,000%.

Rainbow Chicken informed shareholders on Tuesday, 28 January, that it expects a notable increase in its earnings per share (EPS) and headline earnings per share (HEPS) for the six months ended 29 December 2024.

The chicken producer said its EPS and HEPS will increase by at least 1,100% to 28.35 cents and 29.55 cents, respectively.

It attributed this significant improvement to the continued execution of its turnaround plan.

This plan focussed on improved agricultural performance, enhanced operational efficiencies and higher volumes and margins. 

In addition, this improvement in earnings comes off a low comparative base. In the six months ended 31 December 2023, Rainbow Chicken’s EPS and HEPS were 2.36 cents and 2.46 cents, respectively.

Now, the company expects to report EPS and HEPS of around 28.35 cents and 29.55 cents, respectively.

This is because 2023 marked a disastrous year for poultry producers in South Africa.

The industry was ravaged by an avian influenza (bird flu) outbreak that led to the culling of between 7.5 million and 8 million chickens.

This outbreak has spread rapidly across the country over the past few months and has affected most of the country’s provinces.

“It’s a devastating disease in poultry flocks. It can wipe out a poultry house of 30,000 to 40,000 birds in 3 or 4 days,” Professor Robert Bragg from the Univerisity of the Free State Department of Microbiology and Biochemistry said.

In addition to this outbreak, local poultry producers had to battle with severe load-shedding, which significantly affected the efficiency of their operations.

For example, poultry producer Astral Foods reported a load-shedding bill of around R1.9 billion in 2023. These costs included:

  • The additional cost of diesel to power standby generators.
  • Costs associated with a cutback in poultry production to catch up with the backlog in the slaughter programme.
  • Higher feed costs due to older broilers.
  • Overtime costs for the additional shifts introduced in its poultry processing plants.

Astral said these costs amounted to R741 million for the six months ended 31 March 2023 and forecasted R919 million for the remainder of the financial year.

The company said the cost to operate diesel generators was now an embedded expense burden of approximately R45 million per month. 

Astral’s total load-shedding costs, including capital costs of R200 million, for the financial year will amount to approximately R1.9 billion.

Therefore, with load-shedding having eased and the bird flu outbreak under control, local poultry producers could largely return to normal in 2024.

“Lower commodity pricing compared to the comparative period and a reduction in both load-shedding and avian influenza-related costs have had a positive impact in the current period,” Rainbow Chicken explained. 

It also attributed its improved performance to finance costs that reduced relative to the comparative period due to Rainbow’s improved profitability and the recapitalisation of the company prior to its unbundling.

The company was listed on the JSE’s main board in June 2024 after it was spun off from its parent company, consumer goods giant RCL Foods.

Rainbow Chicken’s full financial results are expected to be published on or about Friday, 7 March 2025.

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