July 5, 2024

South African poultry producer Rainbow Chicken focuses on cost efficiency after listing

South African poultry producer Rainbow Chicken is concentrating on maintaining low costs as it embarks on its journey as a stand-alone company, CEO Marthinus Stander said, Reuters reported.

Rainbow Chicken, one of South Africa's leading poultry firms, was spun off by its parent company, RCL Foods, and listed on the Johannesburg Stock Exchange. Its shares were trading at ZAR 4.50 (US$0.25), up from last week's initial public offering price of 2.85 (US$0.16).

"We're bringing volumes back and have invested in feed milling, all in an effort to keep costs as low as possible," Stander said.

South Africa's poultry industry has faced challenges, including erratic electricity supplies due to frequent breakdowns at the country's ageing coal-fired power plants, which disrupt operations and increase costs. Additionally, the industry was impacted 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. Our goal is to produce chicken and stay relevant to the consumer by keeping our prices low," Stander added.

Stander mentioned that Rainbow had obtained approval to use vaccines against avian flu but noted that "the rules and protocols to be able to vaccinate are not affordable or practical." The company is collaborating with the South African Poultry Association and the country's authorities to address biosecurity standards and monitoring protocols, which the industry finds stringent and costly.

Sam Mokorosi, head of origination deals at the Johannesburg Stock Exchange, said that spinning off Rainbow would allow the company to focus on its niche and be "nimbler" in responding to market changes 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.

-      Reuters