Rainbow Chicken, which listed on the JSE in July, reported a big financial turnaround in the year to June 30 with earnings before interest, tax, depreciation and amortisation (EBITDA) at R629.7 million versus only R29.8m the year before.
Its financial results were still included as discontinued operations in the results of its parent RCL Foods. Rainbow’s reported profit surged to R169.6m profit versus a R299.9m loss the year before.
“The turnaround at Rainbow is now well advanced, with every component of the process yielding positive results. At the core of the transformation is the aim to farm as efficiently and as cost-effectively as possible, with support from a change in breed,” RCL’s directors said in the results.
The 7.9% increase in revenue to R14.53 billion was largely attributable to higher volumes in the retail wholesale channel and higher pricing. The strong increase in EBITDA was despite a R202.6m impact of avian influenza (AI) during the period.
The increase in earnings was ascribed to an enhanced agricultural performance, higher processing yield, good cost management, improved pricing, increased retail and wholesale channel volumes, relief in commodity prices, as well as reduced load-shedding costs.
Net finance costs fell by R43.2m largely due to the benefit of the recapitalisation from RCL Foods in February and May 2024. Vastly improved cash flows from operating activities of R1.21bn (2023: negative R391.1m) was due to improved profitability, favourable working capital movements and lower finance costs.
The group said its transition to the Indian River breed began more than two years ago and was now complete, although the full impact would only be realised in the 2025 financial year. The new breed, a less energy-dense feed and a focus on husbandry basics were driving delivery on all agricultural key performance indicators, the directors said.
The doubling of the capacity at the Hammarsdale processing plant was implemented successfully, which resulted in increased volumes, lower processing costs and the creation of 489 direct and indirect job opportunities.
The AI impact mainly related to the import of hatching eggs, feed costs for extended flocks, disposal of culled birds, extra cleaning and the loss associated with the down placement of broiler birds.
To mitigate the risk of a further outbreaks, Rainbow relocated its Midrand breeder facilities to a less densely populated region.
While a vaccination programme had been approved by the government to better protect the national flock, practical implementation of the programme was currently “prohibitive due to complexity and cost”.
The Animal Feed business reported “satisfactory profitability” by focusing on improving margins and an optimal sales mix. External volumes remained under pressure due to excess production capacity in the market.
On prospects, the group said that while consumers remained under financial pressure and commodity prices were elevated, its performance in the coming year was expected to benefit from its improved agricultural performance and higher volumes.
“The focus now will be on bedding down the separation from RCL Foods, demonstrating ongoing profitability through the commodity cycles, remaining vigilant in terms of risks, protecting agricultural performance and continuing to innovate,” the group said.
BUSINESS REPORT