Rainbow Chicken Limited (RBO.JO) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. I would like to welcome you to the second Annual General Meeting of the ordinary shareholders of Rainbow Chicken Limited, which I shall refer to as Rainbow or the Company. My name is Pieter Louw. I'm a Non-Executive Director and Chairman of the Board, and I will be chairing the AGM. Welcome to our shareholders, my fellow directors, guests and members of the management present today. Your interest in the affairs of Rainbow and participation in this AGM is much appreciated. If you look at requirements, Rainbow's MOI read with the Companies Act stipulate that a quorum for the shareholders' meeting is met when at least 3 shareholders are present at the meeting in person or by proxy and at least 25% of voting rights entitled to be exercised at the meeting are represented. I can confirm that the quorum requirements have been met and that due notice of this meeting has been given. Accordingly, I declare this meeting duly constituted. The notice convening this AGM was made available to shareholders and published on SENS on the company's website on 30 September 2025. Accordingly, the notice has been in your hands for the prescribed period. I will therefore take the notice of the AGM as read. Voting procedure. Before we proceed with the matters on the agenda, I wish to advise that voting will be done by way of a poll in accordance with clause 25.3 of the company's MOI. The meeting proceedings are being recorded. The company's Transfer Secretary, Computershare, has been appointed as scrutineer and will combine paper votes and proxies received to arrive at the final numbers. With the cooperation of shareholders and in order to simplify the voting process, ballot papers and proxies were completed and submitted prior to the meeting. A shareholder does, however, remain entitled to amend the vote exercised in such ballot paper at any time during the course of this meeting prior to vote on the relevant resolution following due process. Once all resolutions have been put to the meeting, the voting has concluded, ballot forms will be processed and thereafter, I will announce the results of all proposed resolutions. Kindly note that in accordance with the provisions of the Companies Act, shareholders attending this AGM by electronic communication will be allowed to participate in and vote during this meeting through the relevant online platform. We shall now proceed with the business of the meeting and voting. Ordinary business. Presentation of the annual financial statements. The annual financial statements of the company and the group for the year ended 29 June 2025, including the report of the directors, report of the Audit and Risk Committee and the independent auditor's report as included in the notice of the AGM are taken as read. Are there any questions concerning the company and/or the group's annual financial statements? Remuneration Committee. The remuneration report, which includes Rainbow's remuneration policy and its implementation report is included in Rainbow's 2025 annual report as published on the company's website. Are there any questions in this regard? Report of the Social and Ethics Committee. In line with the requirements of the Companies Act and Companies Act regulations, Regulation 43, the company has established a Social and Ethics Committee, which is expected to hold a minimum of 3 meetings per annum. Details of the company's Social and Ethics Committee and the responsibilities of the Social and Ethics Committee are included in the company's annual report, which is available on its website. Are there any questions in this regard? If not, I will continue with the ordinary resolutions tabled. We'll now move on to the ordinary resolutions to be passed. In respect of all motions, please ensure that your votes in respect of all resolutions have been correctly reflected on the ballot papers reflected. Thank you very much for that. Ordinary resolution #1, election of a Nonexecutive Director. I propose that Ms. Busisiwe Mavuso, who was appointed to the Board subsequent to the 2024 AGM and is eligible for election, be and is hereby elected as a Non-Executive Director of the company in terms of clause 29.2.1 of the MOI. The Remuneration and Nomination Committee and the Board have reviewed the qualifications, experience and independence of Ms. Busisiwe Mavuso and recommended her appointment as a Nonexecutive Director. The appointment will enhance the Board's governance and strategic oversight capabilities. A brief curriculum vitae of Ms. Busisiwe Mavuso is disclosed in Annexure 2 of the AGM notice. Are there any questions in this regard? I now put the motion to the meeting. Thank you. Ordinary resolution #2.1 and #2.2, reelection of nonexecutive directors. I propose Resolution #2.1, I propose that Mr. Agmat Brinkhuis, who retires by rotation in accordance with the company's MOI and the JSE Listings Requirements and who, being eligible, has offered himself for re-election, be and is hereby re-elected as an Independent Non-Executive Director of the Company. A brief curriculum vitae of Mr. Agmat Brinkhuis is disclosed in the Annexure 2 of the AGM notice. The Board considers the aforementioned candidate eligible and supports his reelection. Are there any questions in this regard? I now put the motion to the meeting. Ordinary Resolution 2.2, I propose that Mr. Willem Ockert van Wyk, who retires by rotation in accordance with the Company's MOI and the JSE Listings Requirements and who, being eligible, has offered himself for re-election, be and is hereby re-elected as a Non-Executive Director of the Company. A brief curriculum vitae of Mr. Willem Ockert van Wyk was disclosed in Annexure 2 of the AGM notice. The Board considers the aforementioned candidate eligible and support his reelection. Are there any questions? And I put the motion to the meeting. Thank you very much. Ordinary resolutions #3.1 and #3.2, the reappointment of the independent external auditors and designated audit partner. And I propose resolution #3.1 for the reappointment of the independent external auditors, Ernst & Young, as recommended by the company's Audit and Risk Committee as independent registered auditors for the ensuing financial year. Are there any questions? If not, I put the motion to the meeting. Ordinary Resolution 3.2 for the reappointment of Ms. Merisha Kassie, as the Company's’ designated audit partner. Are there any questions in this regard? I now put the motion to the meeting. Thank you very much. Ordinary resolutions #4.1 to #4.4, the election of the members of the Audit Committee. We now proceed to the election of the members of the Audit Committee as required by Section 94 of the Companies Act. The Board resolved to separate the Audit and Risk Committee to 2 distinct committees, namely an Audit Committee and a separate Risk Committee. This separation aligns with the recommendations of the King IV report on corporate governance for South Africa 2016 King IV and enable each committee to focus more effectively on specific responsibilities. I pause to mention here that King V, the fifth iteration of South Africa's corporate governance reports was released on 31 October 2025 [Technical Difficulty] in South Africa [indiscernible] of South Africa. It supersedes King IV and is effective for financial years beginning on or after 1 January 2026 with early encouraged. Are there any questions in this regard? I now propose ordinary resolution 4.1 for the election of Ms. Cindy Joy Robertson as a member of the Audit Committee until the next AGM. A brief curriculum vitae of Ms. Cindy Joy Robertson was disclosed in Annexure 2 of the AGM notice. The Board considers the candidate eligible and supports her election. Are there any questions in this regard? I put the motion to the meeting. Ordinary resolution 4.2 for the election of Mr. Agmat Brinkhuis as a member of the Audit Committee, subject to the passing of ordinary resolution #2.1. A brief curriculum vitae of Mr. Agmat Brinkhuis was disclosed in the Annexure 2 of the AGM notice. The Board considers the candidate eligible and supports his election. Are there any questions? I now put the motion to the meeting. Ordinary Resolution 4.3 for the election of Ms. Zimkhitha Phaphama Zatu Moloi, as a member of the Audit Committee. A brief curriculum vitae of Ms. Zimkhitha Phaphama Zatu Moloi was disclosed in the Annexure 2 of the AGM notice. The Board considers the candidate eligible and supports her election. Are there any questions? I now put the motion to the meeting. Ordinary Resolution 4.4 for the election of Ms. Busisiwe Mavuso as a member of the Audit Committee, subject to the passing of ordinary resolution #1. A brief curriculum vitae of Ms. Busisiwe Mavuso was disclosed in the Annexure 2 of the AGM notice. The Board considers the candidate eligible and supports her election. Are there any questions in this regard? I now put the motion to the meeting. Thank you very much. Ordinary resolutions #5.1 to #5.4, the election of the members of the Social and Ethics Committee. I now propose ordinary resolution 5.1 for the reelection of Ms. Zimkhitha Phaphama Zatu Moloi as a member of the Social and Ethics Committee until the next AGM. A brief curriculum vitae of Ms. Zimkhitha Phaphama Zatu Moloi was disclosed in the Annexure 2 of the AGM notice. The Board considers the candidate eligible and supports her reelection. Are there any questions? And I put the motion to the meeting. Ordinary resolution 5.2 for the reelection of Mr. Agmat Brinkhuis as a member of the Social and Ethics Committee until the next AGM, subject to the passing of ordinary resolution 2.1. A brief curriculum vitae of Mr. Agmat Brinkhuis was disclosed in the Annexure 2 of the AGM notice. The Board considers the candidate eligible and supports his reelection. Are there any questions? And I put the motion to the meeting. Ordinary Resolution 5.3 for the reelection of Mr. Stephen Parsons as a member of the Social and Ethics Committee until the next AGM. The brief curriculum vitae of Mr. Stephen Mark Parsons was disclosed in the Annexure 2 of the AGM notice. The Board considers the candidate eligible and supports his reelection. Are there any questions? And I put the motion to the meeting. Ordinary Resolution 5.4 for the reelection of Mr. Wouter Alphonso de Wet as a member of the Social and Ethics Committee until the next AGM. A brief curriculum vitae of Mr. Wouter Alphonso de Wet was disclosed in the Annexure 2 of the AGM notice. The Board considers the candidate eligible and supports his reelection. Are there any questions. I now put the motion to the meeting. Thank you very much. Ordinary resolution #6, which is an enabling resolution. And I propose ordinary resolution #6, which is intended to authorize any executive director or the company or the Company Secretary to do all such things and sign all necessary documentation to give effect to the ordinary and special resolutions adopted at this AGM. Are there any questions? And I put the motion to the meeting. Thank you very much. Ordinary resolution #7, a nonbinding advisory vote in respect of the remuneration policy. And I propose ordinary resolution #7 to put to a vote in accordance with the principles and recommended practices of King IV as required by the JSE Listings Requirements, the company's remuneration policy as included in the company's remuneration report, which is available on the company's website, is submitted to shareholders for consideration and endorsement by way of a nonbinding advisory vote. The resolution is proposed to shareholders to endorse the company's remuneration policy as set out on Page 112 of the integrated annual report. Shareholders are reminded that in terms of King IV, the passing of this nonbinding resolution is by way of a nonbinding advisory vote. Are there any questions in this regard? I now put a motion to the meeting. Thank you. Ordinary resolution #8, nonbinding advisory vote in respect of the company's remuneration implementation report. And I propose ordinary resolution #8 to put to a vote in accordance with the principles and recommended practices of King IV and as required by the JSE Listings Requirements, the company's remuneration implementation report as included in the company's remuneration report, which is available on the company's website is submitted to shareholders for consideration and endorsement by way of a nonbinding advisory vote. The resolution is proposed to shareholders to endorse the company's remuneration implementation report as set out on Page 120 of the integrated annual report. Shareholders are reminded that in terms of King IV, the passing of this nonbinding resolution is by way of a nonbinding advisory vote. Are there any questions in this regard? And I put the motion to the meeting. Thank you very much. Ordinary resolution #9, approval of the long-term incentive scheme. Ordinary resolution 9 requires that shareholders approve, one, the adoption and implementation of the Rainbow long-term incentive scheme and certain features which were set out in Annexure 1 accompanying the notice of the AGM and two, that the directors be authorized to do all such things and sign all such documents as may be necessary or desirable to give effect to the scheme. Are there any questions in this regard? I now put the motion to the meeting. Thank you very much. We now come to the special resolutions. I will now propose the special resolutions for approval. Each resolution requires that at least 75% of the voting rights exercised by be cast in favor of the resolution for it to be passed. Special resolution #1, the general authority to provide financial assistance in terms of Section 44 of the Companies Act. Special resolution #1 requires shareholders to authorize and enable the company to provide financial assistance in the appropriate circumstances in accordance with the provision of Section 44 of the Companies Act, the company's MOI and the JSE Listings Requirements. Section 44 of the Companies Act empowers the company's Board to authorize a provision of direct or indirect financial assistance for the purposes of or in connection with the subscription of any option or any securities issued or to be issued by the company or a related or interrelated company or for the purchase of any securities of the company or any related or interrelated company or corporation pursuant to a special resolution of the shareholders of the company adopted within the previous 2 years as a mouthful. Are there any questions in this regard? And I put the motion to the meeting. Thank you very much. Special resolution #2, the general authority to provide financial assistance in terms of Section 45 of the Companies Act. Special resolution #2 requires shareholders to authorize and enable the company to provide financial assistance in the appropriate circumstances in accordance with the provisions of Section 45 of the Companies Act, the company's MOI and the JSE listings requirements. Section 45 of the Companies Act empowers the company's Board to authorize the provision of financial assistance to a related or interrelated company or corporation pursuant to a special resolution of the shareholders of the company adopted within the previous 2 years. Are there any questions in this regard? I now put the motion to the meeting. Thank you very much. Special resolution #3, approval of nonexecutive directors' remuneration. Section 66.9 of the Companies Act provides that the company may pay remuneration to directors for their services as directors only in accordance with the special resolution approved by the company's shareholders within the previous 2 years. Special resolution #3 requests shareholders to approve the proposed remuneration for nonexecutive directors as set out in the AGM notice, each by way of a separate vote for the period commencing on 20 November 2025 to the date of the company's next Annual General Meeting. Are there any questions in this regard? If not, I put the motion to the meeting, and thank you very much. Special resolution #4, general authority to repurchase shares. Special resolution #4 requests shareholders to grant the Board a general authority to approve the company's repurchase of its own ordinary shares as permitted in terms of the Companies Act, the company's MOI and the JSE listings requirements, subject to the restrictions and the Board's understanding -- undertakings as set out in detail in the notice of the AGM. Are there any questions in this regard? If not, I put the motion to the meeting. Thank you very much. That brings us to the end of all the ordinary and special resolutions. And I think while Computershare tabulation count all the votes, I would like to hand over to our CEO, Mr. Marthinus Stander, to say a few words.

Thank you, Chair. We are delighted to have hosted our second AGM as a JSE-listed company. Obviously, I want to thank you for your support as shareholders, and we acknowledge that it is our job as management to continue to deliver results that will reward your loyalty. We may, of course, not point to future results, but what is in the public domain and what is very important and significant to us is that we are experiencing a lower raw material input cycle. I also wish to emphasize the important role of poultry in South Africa and its economy. We are, in many ways, the dynamo of agriculture in South Africa because of our use of maize, and we are, in many ways, the reason for the soya industry that has flourished in recent years. We supply and contribute significantly to food security. We create a significant number of jobs, and we support rural development and infrastructure often in a failing infrastructure of the municipalities and the services. In the wake of the poultry inquiry, it's also important to emphasize that scale is very important. to produce the cheapest chicken on shelf, and we think that is what our consumers need. The industry also needs custodians of the best genetics and best feed quality. This is the very enabler of smaller farming and smaller farmers scale and the supply of day-old chicks and of bagged feed. We literally have hundreds and hundreds of successful small farmers in South Africa. Once more, thank you very much for tuning in, and we wish you all the best. Thank you.

Thank you very much, Marthinus, for those words. I think I'm going to hand to the operator. I think there's a question from somebody dialing in.

You have a question from the line of Chris Logan from Opportune Investments.

Yes. Thanks, Mr. Chairman. I've got a couple of questions, but before I give you the questions, if I can just say it's great watching the progress at Rainbow. It's been a fantastic turnaround, and I'd like to commend everyone involved. It really has been fantastic. I mean, as we all know, Rainbow had a torrid period for like a decade. So very well done on that. Just a couple of questions. My first question would be on the remuneration policy. You talk about a minimum shareholding requirement. What type of level are you aiming at? I certainly hope it's not going to be too low.

Chris, Pieter Louw speaking. I hope you are well and it's great for us to be dialing in. Thanks very much for the interest in the company. If I'm going to hand over to our Chairman of the Remuneration Committee, Mr. Stephen Parsons, he's sitting right opposite table over here. And I think, Steve, if you can answer Chris' question, please.

I think in terms of the minimum shareholding question, we've taken the benchmark of the market in terms of that, and it is then linked to what is appropriate for the minimum requirement for the executive of the prescribed officers to cover in terms of their stay that's linked to the period they do the business over the long-term incentive scheme. So it is benchmarked and it is appropriate at this point in time.

Chris, I can add to that. Thanks very much, Steve. Obviously, it is a very topical point out there. And we will make sure that it is at this point market related. Thanks for the question.

Yes. If I may just add in the South African market, the average of South Africa for these requirements is incredibly low compared to global norms. It was quite interesting. I don't know if you saw a week or so ago, Old Mutual came out with a sense that they were upping their minimum shareholding requirement for the CEO. Part of the reason is because they haven't been happy with past share performance. So there's a strong correlation. Just then if I may move on, you said there's been a fantastic turnaround operationally, the results are coming through. Everything is looking good. But if we look at your major peer, Astral, -- there's a major rating gap to Astral. So whatever metric we look at, whether it's PE, price to NAV, EBITDA, enterprise value to EBITDA, Rainbow is very much worse rated. Does the Board apply its mind as to how to close this ratings gap? And perhaps you could give us some insight into any possible strategies you may be working on?

Chris, it's a very good question. Pieter speaking again. Obviously, yes, Astral obviously is a higher rating, better rating, I think, currently than Rainbow. Just take note to your point and Marthinus' point earlier as well, we are or were at least for the past few years in a turnaround phase. I think we are more or less, I think, satisfied with the progress with the turnaround plans. But I think the one big difference, I think, between us and Astral is obviously the free float. They have a much bigger free float than us. You know Rainbow owns about 80% of the shares in this company. And with a few other shareholders, 3 or 4 shareholders, we own about 95% of the company's shares. So I think that makes it a bit difficult. And I think that is possibly one of the reasons, I think, why the rating is definitely less. In terms of plans, what we can do to improve the rating, I think it's actually only 2 things in my mind. Number one was drive the company's underlying performance. That is absolutely [indiscernible] The better the company performs, the more interest there will be from shareholders or the market out there for the shares. And secondly, obviously, also improve the shareholder returns by way of, obviously, market price increases, I've spoken to that and also announce dividends on the other side. They must go to shareholders. So Chris, we've got a part there. But Marthinus Stander I don't know whether you want to add something.

No, Chair. I think we work with what's under our control, and that is obviously the operational performance. We've just been listed now going to our second year. So I think as time goes by, as you say, we continue that trajectory, it will help this course.

I take your point, particularly on the share liquidity. I mean, I've been trying to buy shares. It is quite tough. And obviously, that's largely out of your control. There is one aspect, which I think is within the Board's control, and that's your -- the amount of cash you've got on your balance sheet. I mean you've got more cash -- more cash than Astral. And your cash per share is something like ZAR 2 per share, if I've got my numbers right. And your dividend cover, I know it was only your first dividend, but a lot higher than Astral. I know you've got a strong balance sheet, but isn't your balance sheet a bit lazy? And don't you think if you distributed more cash to shareholders it would help get higher returns and a better rating.

Yes, Chris, valid comments again. But you will know this is, number one, an agricultural business. So we came through avian influenza in 2020s -- I think late 2023 as an outbreak of that. And I think both Astral and us and the rest of the industry went through a very bad time. So I think all of us are definitely -- and I think you can also see in the case of Astral, they mentioned, I think, where they say they're very cautious on just spending their cash on the balance sheet. So yes, we are definitely -- we are cash rich at this stage, and it's a privilege actually for this company to be cash rich because the link to all of what I said now there is a massive capital investment program on the go to actually catch up with CapEx of the past to improve CapEx and capital assets that were actually neglected in the past. So that process is ongoing. And obviously, for that, you need cash. But point taken on the dividends, and we are working on that, obviously. And you know Remgro is also a big shareholder in this. And I can assure you we also love our dividends, but we must be very careful on how we treat the cash on the company's balance sheet.

Sure. Just -- yes, I think it's important, is it possible to sort of put -- quantify how big this CapEx program is? I had the perception that there was still work to do because your asset base wasn't as final conditions as Astral, but it wasn't ginormous. Is it possible just to give some insights into how big this CapEx program may be?

Chris, it's a difficult question to answer, I think. I don't think we disclosed anywhere. I'm now looking to our CFO, Kerry van der Merwe here. Yes, all I can say there is definitely CapEx that need to be spent, I think, in terms of the backlog of CapEx. So don't mind, Chris, elaborate on the numbers.

Yes. Sure. Okay. I mean, obviously, while there's uncertainty about CapEx, the market will put a discount on the share. For instance, Astral, we know they're quite open with their CapEx. So I understand where you're coming from. I mean, I'm not trying to be too hard. I think you've done a fantastic job, and you're coming more and more on site and improving things. So all in all, well done. I'm in there for the rerating. So thanks very much, Mr. Chairman and everyone else.

Chris, thanks for your questions, and it's really appreciated. And I think on behalf of the Board, thanks for dialing in. It's always nice to talk to you, Chris. I'll see you soon, hopefully, after Remgro AGM.

Yes.

Chair, there are no further questions.

Are there any further questions?

There are no further questions, Chair. There are no further questions, Chair.

Thank you very much. We can now then go to the results of the voting. All voting on the resolutions put before the meeting and processing of the ballot forms is now complete. I've received the results of the voting from our scrutineers, and these will shortly be displayed on the screen. And I will summarize the voting results as confirmed by our scrutineer.

Give us a minute to put the results on the screen.

You will see the results of the resolution on the screen. I think all of them have been passed. You can see number one, it's 100%; Resolutions 3.1, 3.2 were passed by 100%. Resolutions #4, #5, #6 [indiscernible] #6 passed by 100%. #7 99.39%; #8 99.39%; #9 99.9%. And the special resolutions #1 passed by 94.21%. Resolution #2 100%. 3.1 100%; 3.2 99.99%; 3.3 passed, 3.4 passed. So all those special resolutions passed, 3.10 passed and resolution #4 also passed by 99.90%. So all the resolutions have been duly passed in terms of the Companies Act. Do you have any questions? All the ordinary and special resolutions have been passed by the requisite majorities and the comprehensive voting results in respect of each resolution will be disclosed in the SENS announcement, which will be released later. Before we end this AGM, I would just like to extend a few thank yous to a lot of people. Firstly, I think for the shareholders for just sticking with us through a few really tough years. Thank you very much for your support. My fellow Board members for their dedication in the past year, I think we've had more meetings than we all possibly anticipated, but we are here after 15 months, and thank you very much for all your hard work. But most importantly, the Rainbow management team and all of the staff for their turnaround effort in this company and for just believing that we will turn this company around. Thank you very much for that. It's really a privilege for this Board to work with this management team. Thanks a lot. Appreciate it. As there are no other business, I now call this meeting to a close, and I thank you for the attendance and participation in this meeting, and we're looking forward to seeing you all at the next AGM. Thank you very much.