Johannesburg — JSE-listed Rainbow Chicken , supplier of birds to fast-food chains KFC and Nando's, yesterday warned of lower profit levels to come, even as it reported higher chicken sales.

Despite predictions of a return to growth next year, consumers, facing still-high debt levels and uncertainty about their jobs, will continue to buy less chicken, putting pressure on margins, the Durban-based company said.

"Considering the economic recession and job loss statistics, consumer spending is expected to remain under pressure, translating into softer demand and continued depressed chicken realisations," the company said while presenting its half-year results yesterday.

Rainbow, SA's largest chicken producer, said revenue from chicken sales in the six months to September grew 4,7% to R2,6bn.

Pretax profit jumped 37% to R249m, although this was distorted by the inclusion of financial instruments used in the feed procurement strategy.

In the downturn, Rainbow, like its competitor Astral Foods, is trying to sell more higher-value products that give better profit.

It doubled volumes of crumbed frozen food over the past year, the company said. Even though the rate of feed price increase had come down -- an inflation rate of 46% in 2007 and 35% last year had turned into a modest 6% rise so far this year -- the company had not been able to benefit fully, as it bought in advance.

"The rate at which the input prices has declined has made it difficult to take full advantage of the lower pricing," it said.

Like rival Astral, Rainbow has had to contend with a higher level of imported chicken, mostly from Brazil and Argentina, as a result of the stronger rand.

"Total chicken imports (excluding turkey and mechanically deboned meat) have increased 50% over the past six months (market share 6% to 8%), largely due to the strengthening of the rand."

The local chicken market grew 17% in rand value over the past 12 months to R20,7bn, the company said.