Our opinion on the current state of RAINBOW(RBO)Rainbow is a newly listed poultry company covering all stages of chicken production, from broilers to processing. It was unbundled from RCL Foods in June 2024, with RCL shareholders receiving one Rainbow share for every RCL share they held. The poultry industry, known for its tough market conditions, presents significant challenges, including high working capital requirements for stock and debtors, reliance on large unionized workforces, and competition from cheap imports. Additionally, it faces disease risks like Newcastle disease, which can result in significant losses.
In its financial results for the year ending 30th June 2024, Rainbow reported a profit attributable to shareholders of R180.2 million, reversing a loss of R259.5 million in the previous year. This equates to headline earnings per share (HEPS) of 20.26 cents, up from a prior loss of 30.66 cents. Revenue also increased by 7.9%, with basic earnings per share (EPS) moving to 20.25 cents, compared to a loss of 29.15 cents in the previous period.
Given its recent listing on the JSE, there isn’t yet sufficient trading history for a reliable technical analysis. However, the financial turnaround suggests an improvement in operational efficiency or market conditions. Rainbow remains in a challenging industry with inherent risks, but the initial profitability indicators may draw interest from investors seeking exposure in the sector.
