Rainbow Chicken is paying its shareholders twice this year. There is the usual final dividend, 45c a share, and then a special one of 75c on top, declared because the company finished the year with more cash than its plans need.
A special dividend is what a board does when the money has arrived faster than the uses for it. It sits outside the normal payout and nobody should read it as a promise to repeat. Rainbow's directors named their reasons plainly: a strong cash position and low gearing, meaning very little of the business is funded by borrowing.
The year beef had
Chicken did not get cheaper. Beef got dearer. Foot-and-mouth disease pushed red meat prices up, some cuts by more than 30%, and shoppers went where the protein was affordable. Chief executive Marthinus Stander said that switch was the main event of the year, and that red meat prices have since begun to stabilise. Chief operating officer Wouter de Wet added that households remain under financial pressure, and that the cheapest lines, chicken heads, feet and soup packs, did well on the back of it. Stander's read on the pattern runs longer than one year: even when interest rates or fuel costs ease, he said, consumers come back to chicken first.
What that did to the accounts
Revenue rose 7.7%, to R17.1 billion. The profit line moved much harder: earnings before interest, tax, depreciation, amortisation and impairment doubled, to R2.136 billion. The gap between those two is the year in a single line.
Rainbow kept 12.5 cents of every rand it took in, against 6.7 cents the year before. Chicken prices held firm while the cost of feeding the birds fell, and the space between those two is where the money came from. The feed business itself made more money on lower selling prices, by chasing the higher-margin volumes rather than the tonnage. The group ended the year with R2.4 billion in cash and very little debt.
Why next year turns on maize
Feed is 60% to 65% of what it costs to raise a chicken, so the next set of results is a weather story before it is a poultry one. Stander expects a strong El Nino, the hot, dry pattern that cuts South African crop yields and lifts feed costs. His argument against panic is this year's harvest: even in the worst case of lower planting and lower yields, he said, there will still be enough maize in South Africa, and there is plenty of groundwater. Rainbow may forward-buy maize and soya to lock the cost in anyway. The two dividends are payable on 12 October.
