Chicken Industry

Tough times in poultry industry

The poultry industry is bracing itself for further tough times as imports and avian flu continue to affect local businesses. This was evident for industry player RCL Foods, which released its annual financial results this week. RCL showed a significant loss of 34.1% in earnings from R832.9 million last year to R548.5m this year. However despite its losses, it said it had found a way to sustain itself with a new business model.


The group’s results were severely impacted, with the widely-reported poultry industry issues having decimated profits due to cheap imports still flooding the market. Chief executive Miles Dally said the 2017 financial year was tough, largely due to the drought, the industry crisis and the economic downturn.


“These challenges have reinforced the importance of our strategy to move towards a more balanced portfolio with strong added value categories and reduced commodity exposure. Building on the work we began three years ago, our committed efforts have seen us achieve more stability in our total portfolio and within our individual category clusters.”


He said the market remained significantly oversupplied due to the substantial increase in “dumped” product that has occurred in recent years and which has continued to grow during the year.


“The outcome of the crisis remains uncertain, but substantial work has been done between the government and the industry to find a sustainable solution. We remain confident in our strategy and are making steady progress towards our goal of a diversified food portfolio.”


He said the chicken business was expected to achieve significant improvements in profitability driven by the revised business model and lower input costs.


From a national perspective, the county’s poultry industry continued to suffer but efforts were being made to ensure it remained sustainable.


Dr Charlotte Nkuna, acting chief of the SA Poultry Association, said the industry was currently focused on beating the avian flu outbreak and working towards minimising EU imports as well as transformation within the industry.


Since the first outbreak in June, the bird flu virus has been detected in five provinces, – including KwaZulu-Natal, which has cost the industry around 300 000 chickens in deaths and culling.


“We’ve been engaging with the government closely so we can tackle the issue of EU imports before it cripples us further. We’ve called for a safeguard against EU imports and we’re waiting for feedback from government regarding what sort of assurance we will get,” said Nkuna.


She said despite American chicken imports having a cap of 65 000, it was still working towards reducing this number.


“On a more positive note, the chicken industry is resilient. It has been able to bounce back before despite having to face challenges within a tough environment. The government has been more informed on the needs of the industry and we hope this will help with negotiations going forward.”


First published in Sunday Tribune on 03 September 2017