Rainbow Chicken RBO Reports Profit Surge Amid Bird Flu Threat

Rainbow Chicken RBO reported more than a 14-fold increase in half-year profits, recovering from a significant bird flu outbreak that impacted a third of the national flock. Despite this recovery, the threat of avian influenza looms due to slow vaccination efforts, prompting calls for government support. The firm has chosen to reinvest profits for growth instead of paying dividends.

Rainbow Chicken RBO reported a significant profit increase of over 14 times in half-year earnings as it bounced back from South Africa’s worst bird flu outbreak. However, the company has cautioned about the potential resurgence of the disease, attributed to the slow progress of the vaccination campaign. In 2023, South Africa saw the loss of one-third of its national chicken flock due to a high-death-rate strain of avian influenza, which also impacted global poultry markets, notably in France and the U.S., resulting in increased egg prices.

Despite the recovery of South Africa’s poultry sector in 2024, stakeholders are wary of another potential outbreak. The government-endorsed vaccination initiative is impeded by costly monitoring and testing protocols. The South African Poultry Association has voiced the need for government subsidies for vaccinations and compensation for farmers affected by prior outbreaks. Rainbow Chicken emphasized the seriousness of the avian influenza threat, particularly in winter months, in their financial results.

For the six months ending December 2024, Rainbow reported headline earnings of 317.6 million rand ($17.51 million), a substantial rise from 21.9 million rand during the same timeframe in 2023. The company opted to forego a dividend to reinvest its free cash flow into infrastructure, supporting its goal to become a leading, low-cost poultry producer. Rainbow, which operates under the brands Rainbow, Simply Chicken, and Farmer Brown, was spun off from RCL Foods and became a separate entity listed in June.

In summary, Rainbow Chicken RBO has seen a remarkable recovery in profits following the bird flu outbreaks in South Africa. While the company celebrates this financial upswing, it remains alert to the risks posed by avian influenza, emphasizing the critical need for an effective vaccination strategy and government support. The decision to reinvest profits into infrastructure reflects its long-term growth ambitions in the poultry market.

Original Source: www.tradingview.com