Rainbow Chicken Warns Government: Bird Flu Still a Major Threat Despite Earnings Surge

Rainbow Chicken, one of South Africa’s largest poultry producers, has reported a massive surge in earnings for the six months ended December 2024. However, the company has issued a stark warning to the government, stating that avian influenza (bird flu) remains a significant risk to the industry and requires urgent attention.

A Strong Financial Performance

Rainbow Chicken, which was unbundled from RCL Foods and listed on the JSE in June 2024, delivered impressive results in its first interim financial report. Revenue from operations increased by 8.9% to R7.9 billion, while earnings before interest, taxes, depreciation, amortization, and impairments (EBITDA) soared by 119% to R581.1 million.

Earnings per share (EPS) and headline earnings per share (HEPS) also saw remarkable growth, increasing by 1,407.6% and 1,348.8%, respectively.

The company attributed its strong performance to consistent operational improvements, enhanced efficiencies, disciplined cost management, and lower commodity prices. Additionally, reduced costs related to load shedding and bird flu outbreaks contributed to the positive results.

Bird Flu: A Lingering Threat

Despite the financial success, Rainbow Chicken emphasized that bird flu remains a material risk to its operations. The company has taken several steps to mitigate this threat, including culling breeder birds, importing eggs, and relocating its Midrand breeding facility to a less densely populated area near Rustenburg.

These measures, along with enhanced biosecurity protocols, have reduced the risk of outbreaks, particularly in breeding flocks. However, Rainbow Chicken warned that the government’s current bird flu vaccination protocol is costly and impractical for the table egg and chicken industries.

“While the Government has provided a protocol for bird flu vaccination, the cost and conditions are prohibitive for the table egg and chicken industries and require urgent reconsideration by the State,” the company stated.

A Call for Government Action

Rainbow Chicken’s warning highlights the need for government intervention to address the bird flu crisis. The company urged authorities to reconsider the vaccination protocol to make it more accessible and affordable for poultry producers.

The ongoing threat of bird flu not only jeopardizes the poultry industry but also poses a risk to food security in South Africa. With Rainbow Chicken playing a major role in the national supply of chicken, any disruption caused by bird flu could have far-reaching consequences.

Investing in Growth

Despite the challenges, Rainbow Chicken remains focused on its strategy of becoming a market-leading, low-cost chicken producer in South Africa. The company is investing its available free cash flows into growing its infrastructure platform to support this goal.

As part of its growth strategy, Rainbow Chicken has prioritized improving its sales channel mix, managing its product portfolio, and increasing production volumes. These efforts have already yielded positive results, with the company reporting higher revenues and improved profitability.

No Interim Dividend

Given its focus on growth and infrastructure investment, Rainbow Chicken’s board of directors chose not to declare an interim dividend for the period. The decision reflects the company’s commitment to strengthening its operations and ensuring long-term sustainability.

Rainbow Chicken’s impressive earnings surge is a testament to its operational improvements and strategic focus. However, the company’s warning about bird flu underscores the need for government action to protect the poultry industry and ensure food security.

As Rainbow Chicken continues to invest in its growth and infrastructure, the hope is that the government will heed its call and take decisive steps to address the bird flu crisis. For now, the company remains vigilant, balancing its financial success with the ongoing challenges posed by avian influenza.

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