Diversified portfolio stabilises RCL Foods

RCL FOODS said yesterday that its diversified portfolio had resulted in more stability for the business after the knock taken by the poultry industry over the past two years.

The group said the local poultry market was significantly oversupplied, because of the substantial increase in products being dumped by overseas suppliers.

“Input costs escalated substantially in the financial year as a result of the drought, and there was limited capacity to pass on the cost increases given the oversupplied market,” the group said.

However, its diversification into other core food categories, such as sugar, grains (milling) and animal feed, continued to help stabilise the group.

In the year to the end of June, RCL Foods’ chicken unit implemented a new business model designed to reduce the group’s reliance on commodity-driven categories.

The Hammarsdale operation was reduced to a single shift, and the Tzaneen operation was in the process of being sold, thereby eliminating a significant portion of loss-making individually quick-frozen product.

The group said the total cost of implementing these strategic actions was R223.9 million.

The new business model had shown positive results in the chicken unit, where second-half earnings before interest, tax, depreciation and amortisation (Ebitda) were R94.9m, compared with normalised Ebitda of R14.1m for the first six months of the year.

RCL Foods’ overall revenue declined 0.3 percent to R24.95 billion, while Ebitda declined 0.8 percent to R1.75bn, with the associated margin flat on the prior year at 7 percent.

Headline earnings were down 34.1 percent to R548.5m, while normalised headline earnings per share rose 7.5 percent to 68.6 cents a share.

Chief executive Miles Dally said that, despite the difficult year, investment in RCL Foods’ brands had reaped rewards.

“We have continued to grow our basket with current and new customers, developing tailored solutions across various categories, and we have made good progress in optimising our value chain. We remain confident in our strategy, and we are making steady progress towards our goal of a diversified portfolio, with a stronger emphasis on higher-margin, added-value categories and reduced exposure to commodity product lines,” Dally said.

The directors declared a final gross cash dividend of 20c a share, bringing the total dividend for the year to 30c.

RCL Foods shares fell 1.59 percent to close at R15.50 on the JSE yesterday.