180115:Rainbow Chicken directors say great strides have been made to restore the company to operational sustainability Photo Supplied
RCL Foods will list iconic South African chicken company, Rainbow Chickens, next month as part of an unbundling to its shareholders, in spite of really tough markets, both on the bourse and in the poultry industry.
The poultry group had said in March, in its results for the six months to December 31, that it wished to separate from its poultry operation housed in the legal entity Rainbow Chicken Limited, via a listing of Rainbow on the Main Board of the JSE. Yesterday, RCL’s directors said Rainbow shares would start trading on July 1.
The unbundling will be implemented by way of a distribution of 890 296 405 Rainbow ordinary shares, in the ratio of 1 Rainbow share for every 1 RCL share held. RCL shares traded 2.6% higher at R10.65 by lunchtime yesterday.
Smalltalkdaily Research analyst, Anthony Clark, who follows the sector closely, said it was an inopportune time to list given the challenges faced by the local poultry industry, soft prices, the fact that Rainbow still had not yet been fully turned around, stock market sentiment, and the fact that 80% of the shares will remain in the control of investment group Remgro.
“The big question is what Remgro will do with its 80%. I think it will exit and the 80% will be sold to a BEE grouping, funded by the PIC (Public Investment Corporation), which already owns the Daybreak poultry business,” said Clark.
He said for RCL shareholders, who had to weather the “slings and arrows” of a very volatile poultry market, the listing was good news and would leave RCL a more steady, focused food producer, although it might also consider selling its sugar operations in future.
Rainbow directors said they had made a lot of progress in restoring through-the-cycle profitability at Rainbow by means of an appropriately structured operational base.
“Rainbow has demonstrated this by its successful implementation of a change of its chicken breed, which was completed in the current financial year, and improved operational resilience in the face of significant headwinds experienced recently,” the boards of Rainbow and RCL said yesterday.
They said the new phase of the journey for both RCL FOODS and Rainbow was underpinned by their confidence in the ability of Rainbow to operate on a standalone basis and deliver sustainable, attractive financial performance over the long term.
Rainbow in the six months to end-December 2023 reported much improved earnings before interest tax depreciation and amortisation (EBITDA) of R270.6 million, compared with EBITDA of only R34.8m at the June 30, 2023 year-end. At the end of the 2022 financial year Rainbow’s EBITDA stood at R347.1 million.
Its performance however remained compromised by the cost of load shedding and avian influenza (AI), even though the impact of AI was partially mitigated by the extension of layer flocks, improved agricultural performance, and the importation of eggs.
BUSINESS REPORT