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Johannesburg - JSE-listed Rainbow Chicken said efforts to diversify its product range have helped the group maintain its profitability during difficult times.
Launched over the past three-and-a-half years, Rainbow's added value products - which include polonies and viennas - have become its "bread and butter", said marketing and customer director Scott Pitman on Wednesday. "Already added value products constitute 50% of what we sell to Pick n Pay."
Speaking at an investor presentation a day after Rainbow released its results for the year to end-March, Pitman said Rainbow will launch another three sub-ranges within six weeks in an effort to grow its 28% market share of the chicken market.
Chief financial officer Rob Field said the group's plants for added value products have been operating at full capacity for three years.
"We are under-servicing demand in the added value space," he said. A substantial part of the R201.9m set aside for capital expenditure this year will be used to add capacity in the division.
Rising input costs, especially feed costs which have risen by 33.6%, have put a damper on Rainbow's results.
Although revenue increased 14% to R6.8bn, its profit margin halved to 6%. Rainbow's operating profit decreased 45.7% to R423.8m, while earnings were down 41% to R317m.
Coronation Fund Managers' Pallavi Ambekar said Rainbow has performed in line with market expectations. "This performance was mainly driven by the high feed costs which weren't recovered by chicken price increases," she said.
Field confirmed this, saying that even though the group hiked its prices by 15%, this was not enough to cushion it from the feed price rise.
Ambekar said high and volatile feed costs were the biggest challenge the company faced.
"We still face challenges with the recession and the volatility of commodity and exchange rate markets," said Field. However, he expected feed prices to be lower this year, which bodes well for earnings.
"The company should perform well in the next financial year, mainly as a result of lower feed costs," Ambekar concurred.
Rainbow shares were untraded on Wednesday morning.
- Fin24.com
