South Africa's Rainbow Chicken expects lower earnings - SOUTH AFRICA - Rainbow Chicken, the broiler chicken and animal feed business, warned shareholders yesterday that earnings for the year to March would be lower due to the poor performance of its broiler operations and the declining maize price.

The group said yesterday that "earnings ... for the year ... are likely to be lower than the previous year".

"Although earnings per share and headline earnings per share are not likely to drop by as much as 20 percent ... the Rainbow board considers that in the interests of good corporate governance a trading statement should be released."

"The scale of the poor performance has not yet been quantified."

The JSE Securities Exchange requires companies to issue a trading statement if their earnings are expected to differ by more than 20 percent compared with the previous reporting period.

Rainbow went on to say that "due to the current volatility of ... the maize price, it is difficult to give a more specific range. However, the market would be updated closer to the release of results."

Annual results are scheduled to be reported in May.

In the year to March 2004, Rainbow reported a 24 percent rise in headline earnings to R227.4 million. In the interim period, the group reported a 21.6 percent rise in headline earnings to R81.7 million.

A factor that has hindered Rainbow's performance is the negative bird performance in its broiler operations.

Rainbow said "the scale of the poor performance has not yet been quantified. The cause has been identified and the problem resolved but it will adversely impact earnings for the current year." The matter has been referred to the company's insurance brokers.

Another factor that has dented the group's performance is the declining maize price and the group's exposure to certain long maize positions.

As a result, there will be an unrealised loss on the valuation of specific financial instruments required to be valued in terms of AC133, an accounting standard that refers to the recognition and measurement of financial instruments.

"Management remains comfortable with Rainbow's overall maize procurement strategy and repeat their previous comment that the valuation of only certain procurement instruments in terms of the application of AC133 introduces volatility to the reported results," the company said.

Rainbow's share price shed 1.3 percent to R7.60 yesterday. But since August last year, the stock has risen 47 percent. The food and food processors index lost 0.09 percent.

Source: eFeedLink - 9th February 2005