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Rainbow interim results September 05

The macro economic environment remained positive during the period under review with further tax relief afforded by the fiscus, low inflation and stable interest rates all contributing to increased consumer spending. Rainbow”s performance was principally achieved through sustained chicken price realisations, improved supply chain efficiencies, Vector”s contribution and the feed raw material procurement strategy delivering lower feed input costs. Turnover decreased by 3.2% to R1 915.2 million (R1 978.2 million) while headline earnings increased by 83.9% to 55.1cps (30.0cps). The board declared an interim dividend of 17.0 cps (9.5cps) in respect of the six months ended 30 September 2005.



Prospects

Consumer spending is expected to remain positive over the next six months. Despite the negative impact of the feed contamination issue suffered during the second half of last year, earnings growth for the full year is likely to be lower than the first six months growth. A negative earnings contribution of approximately R30 million is expected from the new Further Processing Plant due to it only being commissioned midway through the 2006 financial year. The investment and operational cost structure will exceed the product contributions during the phased launch period. Further to this, as mentioned in the recent trading statement, Vector”s contribution will be lower in the second six months without the YUM! (KFC) volumes.