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JIMMY MOYAHA: Rainbow Chicken Limited, the company spun out of RCL Foods this time last year, has finally completed its first full financial year on the JSE. We’re going to be taking a look at the company’s results with the CEO, Marthinus Stander. He joins me on the line now to reflect on the first year as a listed company and how the business has performed.
Read: Rainbow Chicken earnings skyrocket over 200%
Marthinus, always lovely having you on the show… First full financial year: a 9% increase in revenues, a nice increase in your earnings before tax and interest margins. And, by all accounts, all metrics are pointing to a really good year for the team at Rainbow. How did you reflect on it?
MARTHINUS STANDER: Jimmy, obviously it was very important for us to deliver a decent set of results. You go to the JSE with an element of Ra-Ra and there you find yourself in year one. So we are very excited, very grateful, and we think it went well. Yes, it’s in the bag and we are busy with the second year.
JIMMY MOYAHA: I can imagine a lot of this last year has felt like a blur, considering how busy it was around the listing time. You just had to keep, as you said, moving things along even after the listing date. Just because a company is listing doesn’t necessarily mean you can take your foot off the pedal.
What has the year looked like from a concern point of view? You operate in quite an interesting space in the poultry [sector]. We’ve seen the likes of other local competitors in the form of Astral Foods and Daybreak Foods experiencing their own sets of challenges as poultry producers.
How have you been feeling and reading the market over the last year?
MARTHINUS STANDER: Jimmy, you mentioned we had a few things that we had to do. They were one-offs, but it takes a lot of effort. In the listing itself, we had a lift-and-shift on an SAP enterprise system, so that took quite a bit of time. Those [tasks] are now done, so that’s fantastic.
I think the maize price was a challenge. The transition from the old crop to the new crop, new season, is looking a lot better now with decent numbers coming through from crop estimates which were updated (on Wednesday). So that side is better.
I think we’re still concerned about the consumer being constrained – and I don’t think that’s going to change quickly. But we have spent time on the things under our control over the last three years.
Really I think we’ve fundamentally made improvements in what we call our ‘engine room’, our value chain, and the feed breed agri-distribution space.
It’s a matter now of a new planting season soon. There’s a lot of moisture in the soil, so that’s encouraging. And I think the weather patterns are still looking good.
The trade situation with chicken really being an issue for the Americans and the whole tariff ‘war’-Trump situation is a concern, because it has not been determined yet. We’ll have to see how that plays out.
JIMMY MOYAHA: Marthinus, I’m glad you brought that up because I was going to ask around that. Perhaps you can just give us your thoughts as a poultry producer. We know that the South African poultry industry isn’t too happy that we are offering concessions of more than 70 000 metric tonnes of poultry from the United States to boost the relationships with Washington at the moment. What does that do for the local poultry industry?
We know poultry is a major staple in terms of the South African economy. It makes up, I think, almost 60% of household consumption as a staple food source and therefore in itself means that from a local perspective there’s a lot that goes into that. But it also means that the local producers have a market and 70 000-plus metric tonnes from the United States must surely be a problem.
MARTHINUS STANDER: Yes. Jimmy, there is a bit of history there. I just want to latch on to what you said there. I think what’s very important is we are a national asset in terms of food security and we are effectively the dynamo of the agri industry, because we use so much maize and we’re almost the reason for soya. So it is something that needs protection.
The history around that quota is interesting, though. In 2015 I was part of that team together with Chris Schutte and Dr Davies of the DTIC [Department of Trade Industry and Competition]. So it’s nothing new. It was 65 000 tonnes that was agreed upon.
Remember, Agoa (African Growth and Opportunity Act) was a gift from the Clinton administration to Africa, but Americans wanted to claw something back, so that quota was negotiated. It was exempt from anti-dumping tariffs, but still attracted MFN (Most Favoured Nation) tariffs.
So it’s been around and it grew every year according to agreement and now sits at 72 000. The issue we have is that it should be null and void, because it was always a good corporate citizen act from our side – with no benefit to us – so that zero-tariff benefits could accrue to other industries.
The situation is that it was written into that agreement that the moment those benefits to other industries like wine or agriculture or motor cars or motor car parts fall away, that quota should fall away. Now those benefits to the other industries have fallen away; they are effectively scrapped. So our issue is that we should not be dealing with that quota anymore.
The new issue is if it is something that is offered, we are asking ‘for what?’ because there is no agreement on the table at the moment. And that’s why we want a seat at the table in terms of having discussions about [whether] anything is to be given [to argue that there should be a benefit in return]. We’ve been giving since 2015, and surely some benefit must accrue to us or there must be significant benefit to the rest of South Africa’s industries.
And then one could consider what that means in terms of our willingness to further benefit other industries. We are effectively not part of what should be an MFN package without having knowledge of what’s to be gained.
JIMMY MOYAHA: A little more transparency around the relationship between South Africa and the United States where it relates to poultry.
We’ll leave this conversation on that note. We’ll probably pick it up again when we do have more insight from the relevant parties around that. But for now, we celebrate the maiden financial year of Rainbow Chicken on the financial bourse, as well as that maiden dividend per share of 20 cents that was announced today.
Thank you so much to Rainbow Chicken CEO Marthinus Stander for joining us and giving us a sense of how they fared in this particular year and how they are looking to go into the next.
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