RCL overcomes tough conditions to boost revenue

Despite serious challenges, RCL Foods was able to deliver a 9,2% revenue increase to R17,1 billion for the six months to December 2021. The group’s earnings before interest, taxation, depreciation, amortisation and impairments (EBITDA) rose by 14,4% to R1,29 billion from the previous comparable period.

An interim dividend of 15c/share was declared and the headline earnings per share increased by almost 73c for a 21,6% increase, according to a statement by RCL Foods.

Robert Field, RCL Foods’ CFO, told Farmer’s Weekly that the revenue growth, which had been achieved despite tough operating conditions, had been “pleasing”, and volumes had remained resilient in most categories.

“During the period [under review] RCL was materially affected by costs associated with the current outbreak of avian influenza, civil unrest in July 2021, which disrupted operations in certain KwaZulu

Natal and Gauteng sites, and the fire at our Komatipoort sugar warehouse in October 2021.”

Field added that the continued rise in agricultural commodity input costs due to escalating international prices were of particular concern to food producers. “This rise is fuelled by lower global crop estimates and continued higher demand.”

The chicken division had returned to a break-even point, recovering from an extremely challenging first few months, he said. It had achieved a 34,2% increase in underlying EBITDA to R115,1 million, albeit still at a low margin of 2,1% (previously 1,8%).

He added that among the reasons earnings had improved were higher volumes and price realisations in an avian influenza-impacted local market, with reduced levels of bone-in chicken imports.

These lower imports had been the result of anti-dumping restrictions imposed by government, which had led to improved price recovery. “South Africa’s poultry market is very competitive and we’re now selling at a more acceptable level.”

The sugar business unit had a very strong performance due to improved operational efficiencies, a relatively high world sugar price and favourable local industry factors, and strong local market demand. Earnings had risen by 7,8% to R498 million (11,2% higher than December 2020), he said.

“The [Sugar Cane Value Chain Master Plan] has benefitted the industry tremendously, because it has prevented a lot of dumping. Local consumption is the main thing aiding the industry,” Field said.

He added that it was too early to assess the impact of the increase in the health promotion levy from 2,21c/gram of sugar to 2,31c/gram of sugar (for beverages with over 4g of sugar/100ml), as announced by Minister of Finance Enoch Godongwana during the 2021 budget address in February. – Susan Marais