RCL Foods has attributed the decline in its profitability for the six months ended 31 December 2018 to ongoing imports of cheap sugar and frozen chicken. A recent statement by the company said these imports had continued to result in an oversupply of the commodities, leading to lower prices for its own sugar and chicken.
“Sugar was particularly distressed by abnormally high dumped imports displacing local market sales, leading to an adverse sales mix,” the statement added. RCL reported that while its revenue for the period 1 July to 31 December 2018 had increased to R13,27 billion (2017:R12,82 billion), its earnings before interest, tax, depreciation and amortisation had dropped to R11 billion (2017:R1,2 billion), and headline earnings had declined to R475,1 million (2017:R644,7 million).
Miles Dally, the CEO of RCL, said this negative financial impact had been softened by the growth experienced in the company’s groceries and Mill Bake divisions. The statement said the company had continued to engage with government to seek protection against “dumped” sugar and chicken imports to ensure a level playing field for local producers of these commodities.
“Chicken imports, mainly from Brazil and the US, have grown by over 25%during the period, with the only partial relief to the market’s oversupply position being provided by the reduction in [chicken] volumes as a result ofRCL Foods’ changed business model,” the statement said. Rob Field, RCL’s chief financial officer,told Farmer’s Weekly that the change in its business model had involved a significant reduction in the company’s production and supply of chicken to retail consumers, and an
increased focus on the production and supply of chicken to quick service restaurants.
To achieve this, RCL had to dramatically downsize its chicken production and processing operations from five million birds a week to 3,5 million birds a week. Field added that RCL was increasing its cost-saving measures while reducing its carbon footprint by co-generating electricity at its sugar mills, and by existing and future wastewater reclamation and organic waste-to-energy initiatives at all other facilities.
For the next six months ending 30 June 2019, RCL expected trading conditions to remain challenging due to the poor economic outlook for South Africa. The company expected these conditions to continue proving a challenge for its poultry and sugar segments in particular, the statement said.