Rainbow Chicken Ltd earnings tumble due to cheap imports.

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“Headline earnings per share from continuing operations are down 94.8 per cent while their net income plunged from 266.8 million rand last year to 16.7 million rand this year,” said a statement released by Rainbow Chicken [DATA RBW:RAINBOW CHICKEN LIMITED.] on Tuesday.

On a slightly positive note, Rainbow Chicken did however manage to increase their revenue by 28.7 per cent and cash generated by operations grew by 32.2 per cent.

Unsurprisingly, the company’s Board of Directors have withheld shareholder dividends for the year end due to poor trading results and uncertainty in the domestic poultry market, which they believe is to be blamed on the increasing importation of cheap poultry in South Africa.  

According to the South African Poultry Association, the local chicken market is estimated to have only grown by 7 per cent to 29.8 billion rand over the past year while imports of chicken was at 242 128 tons, being 43 279 tons above the long term average and representing approximately 12 per cent of the local market

In order to promote fairer trading terms, SAPA is said to be engaging with government to introduce poultry import tariffs that could potentially increase by as much as 82 per cent.

Rainbow Chicken will also soon be undergoing a name change on the 2 September 2013 to RCL Foods Limited due to the acquisition of a 64.2 per cent controlling stake in food manufacturing group, Foodcorp Holdings Limited.

“The Foodcorp acquisition positions RCL to diversify and enter new attractive food categories with a range of respected and market leading brands while harnessing synergies and scale benefits,” said Miles Dally, Chief Executive Officer of RCL Foods Limited in a statement.

The groups will now consist of the Rainbow Chicken division, a logistics division run under Vector logistics (a frozen food Logistics Company) as well as Foodcorp.  

In terms of future prospects, the group holds a pessimistic view due to the current deteriorating state of the local and global economy.

“The poor state of the global and local economy means a sustainable improvement in consumer sentiment and spending is unlikely in the near future which will impact across Foodcorp, Rainbow and Vector. The poultry industry is at crisis point and anti-dumping protection will be key to the survival of the industry,” said the statement.

The company does however intend on exploring further growth opportunities in the food sector not only in South Africa, but the entire Sub-Saharan region