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Revised business model spurs profits at RCL Foods

Poultry producer reports a 50% jump in full-year profits.

Poultry producer RCL Foods’ reported a 50% jump in full-year profits on Tuesday, saying the restructure of its chicken business and growth in its grocery unit helped it improve its performance.

Diluted headline earning per share (Heps) rose to 94.5 cents for the year ended June 2018, from 63 cents in the previous year. 

At RCL’s chicken unit, earnings before interest, tax, amortisation and depreciation (Ebitda) rose to R466.8 million from R57.1 million in the year earlier period, boosted by the company’s revised business model, cost cutting and profits from the sale of dormant farms.

“Everything that we have put in place regarding our chicken business is paying dividends and we have weathered some significant storms,” RCL Foods’ chief financial officer Rob Field told Reuters.

RCL, which produces poultry, sugar and other foods, said in 2016 it would cut poultry production and staff numbers as part of a restructuring effort amid stiff competition from imports from Brazil, Europe and the United States.

Despite the improvement in its chicken unit the company faced challenges during the financial year including outbreaks of avian flu and listeria.

South Africa’s listeria outbreak in January last year, the world’s largest ever outbreak of the food-borne disease, killed more than 200 people and infected more than 1 000.

The health department recalled processed meat products known as “polony”, which RCL also produces, after the source of the outbreak was traced to a factory owned by Tiger Brands unit Enterprise Foods in March this year.

RCL Foods said the listeria outbreak resulted in a R158.2 million negative impact during the year ended June 2018.

The company said its groceries business reported a 15.4% rise in Ebitda to R518.4 million benefiting from favourable commodity prices.

RCL announced a final dividend of 25 cents per share, bringing the total dividend declared for the year to 40.0 cents, up from 30 cents a share in the previous year. 

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