Rainbow's earnings plunge

2008-11-20 00:00

KZN-based Rainbow Chicken yesterday reported a 39,6% decline in headline earnings for the six months ended September 30, 2008.

The JSE-listed group expects lower earnings for the full year.

“Consumer spending is expected to continue to soften over the next six months as a consequence of the higher inflation and interest rate environment. Maize and soya prices and the exchange rate are likely to remain volatile over the next few months.

"Prices are expected to remain at the current higher levels translating into significantly higher feed input costs than the 2008 financial year,” the group said.

Rainbow warned that, as in the recent past, sales realisations are unlikely to fully recover all the expected production cost increases.

Input costs across all commodities have soared during the period.

Rainbow stressed that “feed raw material” prices peaked at historically high levels during the past six months and remain volatile.

“This together with the crude oil price and exchange rate volatility, uncertainty over the U.S. crop size and the impact of the credit crisis on world markets has translated into significant challenges for raw material procurement.

“Sourcing reasonably priced raw materials will remain a challenge as it is anticipated that the volatility in the commodity markets will continue for the foreseeable future.”

Group revenue increased by 15,9% to R3,3 billion (2007: R2,9 billion).

Chicken revenue for the six months was 15,5% higher year on year, while Rainbow’s average price realisation increased by 15,4%.

Volumes were marginally higher, despite four less trading days.

Rainbow’s outbound supply chain has been further streamlined with the completion of a new plant-based cold storage facility at the Hammarsdale plant. It expects to benefit from enhanced capacity, process efficiency and integration improvements as a result of this move.

Rainbow estimates that the local chicken market grew by about 10% over the past year, to R17,7 billion. — Witness Reporter.

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