Know all about Rainbow's upcoming listing and unbundling from RCL Foods on the JSE, including key dates, financial performance and the implications for shareholders.
On June 26, 2024, Rainbow will list on the JSE's Main Board under "Consumer Goods," specifically "Food Products," as "RAINBOW" (RBO). RCL Foods shareholders will receive one Rainbow share for every RCL Foods share they own, marking a significant distribution.
Key Dates
- June 25, 2024: Last day for RCL Foods shareholders to trade and be entitled to the unbundling.
- June 26, 2024: Rainbow shares start trading on the JSE.
- June 28, 2024: Unbundling record date to receive Rainbow shares.
- July 1, 2024: Rainbow shares credited to RCL Foods shareholders' accounts.
About Rainbow Chicken
Rainbow has grown into a leading, fully integrated poultry and animal feed producer in South Africa. It operates across the entire chicken production value chain, managing 165 farms, 1,288 houses, 8 hatcheries, 3 primary processing plants, 2 further processing plants, 6 animal feed mills, and a 50% share in the waste-to-value joint venture, Matzonox.
Business Segments
- Chicken: This division includes well-known brands like Rainbow, Simply Chicken, and Farmer Brown, with a strong market presence.
- Animal Feed: As South Africa's second-largest feed producer, Rainbow ensures high-quality feed for both internal use and external customers.
- Matzonox: This innovative operation turns wastewater and poultry manure into renewable energy, contributing to Rainbow's sustainability efforts.
Financial Performance
Rainbow has demonstrated strong financial performance in recent years. In FY2023, the company generated revenue of R13.5 billion, an 18.3% increase from FY2022. Over the past three years, revenue has grown at an annual rate of 14.0%. For the six months ending December 31, 2023, Rainbow generated an EBITDA of R265.4 million, reflecting significant improvements due to strategic initiatives and operational resilience.
Strategic Turnaround
In 2021, a new management team was brought in to address challenges and restructure the company towards a decentralized but integrated regional model. This included changing the chicken breed, which has already shown benefits, as seen in the 1H24 results. Full benefits are expected after FY24.
Operational Improvements
A new strategy to improve chicken rearing has started to show positive results. Improvements in hatchability, feed conversion, lower mortalities, and better average daily weight gain are driving operational efficiency and profitability.
Growth Forecast
Operating margins are projected to rise to 5.8% by FY28 from 3.1% in FY24, driven by higher chicken volume growth and better rearing performance. Lower loadshedding and disease costs are expected in the near term. RCL's earnings are forecasted to grow at a 32% annual rate from FY24 to FY27, one of the highest in the South African food producers sector.
Investment Highlights
- Matzonox: A Key Differentiator - Matzonox stands out as a significant investment, producing electricity, heat, and recycled water from processing and farming waste. This reduces the risk of power failures and fossil fuel usage, contributing to a lower carbon footprint.
- Diverse Sales Channels - Rainbow's diverse sales channels, including a significant presence in the Food Solutions market, provide a stable volume base. The company also focuses on innovation to drive market share within retail chicken categories.
- Rationale for Listing and Unbundling - The decision to list Rainbow separately and unbundle it from RCL Foods follows a thorough two-year analysis. This move aims to allow both Rainbow and RCL Foods to pursue their growth goals independently, giving shareholders more flexibility in managing their investments. Rainbow's improved performance, particularly after the new strategies were implemented, has increased confidence in its ability to succeed as a standalone entity.
The listing of Rainbow on the JSE marks a pivotal moment in its history. As the company enters a new chapter, it stands ready to continue its legacy of excellence in poultry and animal feed production while embracing new growth and innovation opportunities. Rainbow's strategic initiatives, operational improvements, and strong financial forecasts make it a potentially promising investment opportunity in the food production sector.
Currently, EasyEquities only offers access to the Johannesburg Stock Exchange IPOs (Initial Public Offering); these can be found under "New Listing" in one’s EasyEquities account. Newly listed shares from offshore markets are usually available after listing, depending on their liquidity and investor interest.
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