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RCL Foods opts to cut dividend as earnings fall
RCL Foods opts to cut dividend as earnings fall

RCL Foods opts to cut dividend as earnings fall

RETAILER NEWS - Aug 31st 2016, 08:48

DIVERSIFIED food producer RCL Foods has slashed its annual divided almost a third after the worst drought in a century deflated its profit growth. 

SA’s second-largest chicken company, whose brands include Selati sugar, Yum Yum peanut butter, Nola mayonnaise, and Sunbake bread, declared a dividend of 15c in the year to June, down from 22c in 2015.

Headline earnings per share from continuing operations declined 11.9% — the lower end of the company’s profit guidance — to 964.5c. RCL’ s sugar operation, TSB, is mainly in the irrigated Mpumalanga area. But the dry spells and scorching heat reduced dam levels significantly, leaving less water for irrigation.

The drought also lowered the maize crop, resulting in increased feed costs for the chicken division, which also grappled with increased domestic production and imports.

"We thought it (prudent) to reduce the dividend and conserve cash to pursue for future opportunities," RCL CEO Miles Dally said on Tuesday.

Despite the recent improvement in the weather forecast, he said the chicken and sugar industries still faced tough times.

A return to profitability for the sugar unit, where earnings before interest, tax, depreciation and amortisation dropped 42.5% to R234.4m, was only expected in the 2018 financial year.

As for the chicken industry, the outlook is less certain and hinged on whether the government would protect the industry.From DFM Publishers (Pty) Ltd 

Read more about: retail | rcl foods | profit | growth

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