Rainbow Chicken targets low-cost future after listing

The company lowered volumes and invested in feed milling
calendar icon 1 July 2024
clock icon 2 minute read

South African poultry producer Rainbow Chicken is focused on keeping its costs low as it begins life as a stand-alone company, Reuters reported, citing CEO Marthinus Stander on Monday.

Rainbow, one of South Africa's leading poultry firms, was spun off by parent company RCL Foods and listed on the Johannesburg Stock Exchange last Wednesday.

Its shares were trading at 4.50 rand by 1413 GMT on Monday, up from last week's IPO price of 2.85 rand.

"We’re bringing volumes back and we have invested in feed milling, all in an effort to keep costs as low as possible,” Stander told Reuters in an interview.

South Africa's poultry industry has over the past few years battled erratic electricity supplies, blamed on frequent breakdowns at the country's ageing coal-fired power plants, which disrupt operations and drive costs up. The industry was also hit by the country's worst ever bird flu outbreak last year.

“You've got to find ways to survive, no matter what the environment throws at you, ours is to produce chicken and stay relevant to the consumer by keeping our prices low,” Stander added.

He said Rainbow had obtained approval to use vaccines against avian flu, "but the rules and protocols to be able to vaccinate are not affordable or practical".

The company is working with the South African Poultry Association and the country's authorities to address biosecurity standards and monitoring protocols, which the industry considers to be stringent and costly.

Sam Mokorosi, head of origination deals at the Johannesburg Stock Exchange, said spinning off Rainbow would allow the company to focus on its niche and to be "more nimble" to respond to market turns and opportunities.

“The market has been facing some challenges but the fundamental underpinning to the industry is that chicken is still the cheapest form of protein in a growing population," Mokorosi said.

($1 = 18.1708 rand)

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