Trading conditions remain tough, says Rainbow

He said trading conditions for the group remained "tough" and that this was in line with the groups' predictions for the year.

Dally was interviewed after the chicken and branded foodstuff producer's annual meeting in Durban. He said Rainbow had nonetheless done "quite well" over the past two years to deal with a substantial rise in chicken feed costs - its biggest production input cost - which hurt margins as well as the effects of recession on the group.

Dally attributed this success to the group's strategy, transformation and being able to attract "good talent". He said chicken prices were also lower due to a significant increase in supply and a short-term increase in imports.

Competitor strain

Last week Rainbow's competitor, Country Bird Holdings, a large integrated poultry and stock feed group, also reflected the pressure that these businesses were coming under when it warned that earnings per share may fall substantially by 40c-45c for the year to June, from the 65c per share made the previous financial year.

Another Rainbow competitor, Sovereign Food Investments, also said a week before that it expected earnings per share to fall 20% in the six months to August. Sovereign described its average poultry selling prices in the first four months of the year to February 28 next year as "very weak", consumer demand had remained weak and imports had risen in anticipation of higher demand for the Soccer World Cup.

Transformation paying off

Dally said the group had embarked on a strategy of transforming itself into a consumer- and brand-orientated business over the past seven years. "We have made great improvements in the last few years on this," he said, citing as an example the group's chicken polony, which had become the biggest polony brand in only four years.

The supply of about one third of chicken production to major chicken outlets such as Nando's, Chicken Licken, Kentucky Fried Chicken and Woolworths Western Cape through Rainbow's Food Solutions business had also added stability to sales.

Source: Business Day