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
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
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.