RCL Foods re­struc­ture pays off through div­i­dend boost

The Ru­pert fam­ily’s food pro­duc­tion ven­ture, RCL Foods, has re­struc­tured its un­der­ly­ing busi­nesses fol­low­ing a num­ber of years’ ag­gres­sive ac­qui­si­tions and re­cal­i­bra­tion of Rem­gro-owned units. Now the com­pany will fo­cus on grow­ing its brands and dou­bling

Finweek English Edition - - SPOTLIGHT - BY JACO VISSER

Adeep re­struc­ture at South Africa’s sec­ond-largest food pr o duc e r b y r e v e nue , Dur­ban-based RCL Foods, re­cently paid off to i nvestors who re­ceived an 85% higher div­i­dend than the pre­vi­ous year.

RCL Foods, which started off as Rem­gro-owned Rain­bow Chicken Ltd, ac­quired pri­vately-owned Food­corp Ltd and Rem­gro’s sugar-pro­duc­tion as­sets, TSB Sugar, over the past cou­ple of years. A plethora of deals, which in­cluded re­de­nom­i­nat­ing Food­corp’s high-yield euro bonds into a lo­cal rand fund­ing deal, rights is­sues and the ac­qui­si­tion of Vec­tor Lo­gis­tics, set the com­pany up as the undis­puted com­peti­tor of Tiger Brands, the gro­ceries be­he­moth.

RCL Foods gen­er­ated R23.4bn in sales in the 12 months to end June. This was 4.5% higher than the pro forma sales of the pre­vi­ous year, which in­cluded, among oth­ers, a full year of sales at TSB Sugar, ac­cord­ing to its latest re­sults.

The com­pany i s now spl it i nto three units. Un­der its Con­sumer unit falls most of Rain­bow Chicken and Food­corp. TSB, Food­corp’s milling and bak­ing di­vi­sion, as well as Food­corp’s and Rain­bow Chicken’s an­i­mal feed units fall un­der Sugar and Milling. The third unit is Vec­tor Lo­gis­tics, which en­sures that pro­duced goods get to the con­sumer.

“We told the mar­ket we’re not go­ing to run as a hold­ing com­pany,” CEO of RCL Foods, Miles Dally, says. “But we needed time to as­sess all the new lead­er­ship teams that we had.” POUL­TRY RCL Foods’ Rain­bow Chicken brand has al­ways fo­cused on quick-ser­vice restau­rants (QSRs) with large sup­ply agree­ments with brands such as KFC

UNDIS­PUTED COM­PETI­TOR

and Nando’s, ac­cord­ing to Dally. As the dump­ing of chicken in­creased over the years, mainly from EU coun­tries, smaller lo­cal sup­pli­ers started fall­ing off the bus. A re­cent trade agree­ment with the US will see a fur­ther 65 000 tons of bonein chicken ar­rive in SA with­out an­tidump­ing tar­iffs.

“We need to be clear about this, it is dump­ing,” Dally states. Con­sumers in the EU and US pre­fer the white meat, or breast, of the chicken with the so-called brown meat ex­ported to other coun­tries such as SA.

Poul­try pro­duc­ers in the EU and US are prof­itable by only selling the white meat; the brown meat ac­counts for pure profit no mat­ter at which price they sell it, he says.

The SA Poul­try As­so­ci­a­tion, which is the um­brella or­gan­i­sa­tion of do­mes­tic poul­try pro­duc­ers, re­cently put up a fight, with the back­ing of min­is­ter of trade

RCL Foods, which owns TSB Sugar, has re­struc­tured its di­vi­sions fol­low­ing a pe­riod of ag­gres­sive ac­quisi­tory growth.

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