Rainbow Chicken Profit Falls 75% on Rising Costs and Imports

Rainbow Chicken Ltd., South Africa’s largest chicken producer, said first-half earnings fell almost 75 percent as rising imports, high costs and oversupply in its domestic market eroded margins.

Profit for the six months through December fell to 52.3 million rand ($5.9 million), compared with 200.4 million rand in the same period a year ago, the company said today in a statement. Sales increased 15 percent to 4.5 billion rand.

“The lower than anticipated earnings are mainly a function of two major issues facing the local poultry market, namely record levels of imports and high feed raw material input costs,” Rainbow said.

“The resultant over-supply in the local market has meant that the price of chicken in retail bears little reference to its cost of production,” it said.

Rainbow shares retreated as much as 1.7 percent, the most since Feb. 18, and traded 0.7 percent lower at 14.70 rand by 4.36 p.m. in Johannesburg. About 408,000 shares changed hands, almost twice the three month daily average, according to data compiled by Bloomberg.

“The earnings were disappointing,” said Jiten Bechoo, an analyst at Cape Town-based Avior Research Pty Ltd., in a phone interview. “The company was expected to perform less badly than its peers. Sector dynamics for poultry are pretty bad right now. The margins will remain under pressure for fiscal 2013.”

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