Rainbow Chicken has issued a gloomy profit outlook in contrast with an upbeat forecast its closest rival, Astral Foods, produced last week, according to Business Report of South Africa.

The country's biggest poultry producer had expected full-year profit to fall as it continued to battle to pass on high grain feed costs to retailers, Rainbow said after announcing a 39.6 per cent drop in headline earnings to 126 million rand (ZAR) for the first half to September.

Last Friday Astral said it was confident the worst was over, as maize feed prices fell and pricing power returned to chicken farmers, "which should result in improved earnings next year". Astral announced a similar percentage fall in annual net profit of 39 percent to ZAR 327 million.

Earnings forecasts of the two firms are not directly comparable, as Rainbow was projecting for the year to March 2009, after profit had fallen in the first half.

Astral's outlook was for the year to September 2009.

Rainbow's profit could recover in 12 months. It maintained its interim dividend of 24-cent a share, a sign that it remained confident over the longer term.

The two firms have different outlooks for the maize price and consumer demand.

Rainbow said that while maize and soya feed prices had peaked in the first half, they continued to be volatile and were expected to remain high.

Exchange rate volatility, uncertainty over the US maize crop and the credit crisis translated into 'significant' challenges for raw material procurement, Rainbow said.

But Astral said a combination of the global economic crisis, which trimmed demand, and good crop expectations led to grain prices falling recently.

Rainbow's first-half revenue to September rose 15.9 percent to ZAR 3.33 billion from a year ago.

It estimated that the total South African chicken market had grown 10 per cent in the last 12 months to ZAR 17.7 billion, according to Business Report.

Further Reading

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Go to our previous news item on Astral Foods' results by clicking here.