Advertise with

Chicken dumping also contributed to woes in the year to end-June, group says.
Chicken dumping also contributed to woes in the year to end-June, group says.

RCL Foods swings into a loss as sugar tax bites


By Karl Gernetzky - Sep 2nd, 12:44

RCL Foods, which owns Rainbow Chicken and Selati Sugar, said that difficulties in its sugar and chicken business contributed to shaving off R1bn in profits in the year to end-June. 

Record levels of chicken dumping and an adverse sales mix due to the imposition of a sugar tax prompted a 55% fall in cash generated by operations during the period, with the group reporting an after-tax loss of R184m, down from the prior period’s profit of almost R878m.

Headline earnings per share plunged 60.8% to 37.9c, with the group slashing its final dividend by 60% to 10c per share. This brings the group’s total dividend to 25c, from the prior period’s 40c.

SA’s economic environment remained subdued, with the group facing sustained pressure on its margins as it battled to hold on to market share amid declining prices for sugar and poultry, its statement reads.

Earlier in August, the group said it had written down its sugar unit by R761.9m due to a bigger-than-expected effect from the imposition of the government’s sugar tax.

The tax resulted in a higher proportion of production needing to be exported at low international prices, it said at the time.

The group said dumped chicken, accounting for 25% of imports, remains a significant issue in the SA market, while feed costs also increased by 11.2% per ton during the period.

Earnings before interest, taxation, depreciation, and amortisation (ebitda) declined 54.1% to R214.3m, while ebitda for its sugar business plummeted 129.7% to a loss of R84.5m.

The group said it is pleased with the growth of its groceries portfolio, in which ebitda rose 23.4% to R639m during the period.

The company will continue to pursue its strategy of pursuing low production costs in its sugar and chicken divisions, it said.Business Live 

Read more about: sugar tax | rcl foods | business

Related News

Woolworths carves out market share in SA
27/11/2019 - 10:11
In Australia, David Jones's sales declined 2.1%, with the company saying a store refurbishment contributed to the decline.

Push and pull strategies work together to keep consumers coming back for more
26/11/2019 - 10:20
The retail sector is under increasing pressure as consumers have shrinking disposable income in a strained economy. Maintaining share of wallet is critical. Relying solely on a push route to market strategy from manufacturers into retailers is not enough to get consumers buying products. A pull strategy needs to coexist with the push to drive brand consumption. Integrating these strategies requires intelligent and insightful decision-making. This, in turn, requires data generated through smart technology which provides line of sight across the value chain from manufacturer to distribution, retailer to the consumer.

Today’s customers are loyal to speed and convenience, not brands
25/11/2019 - 11:15
Consumer expectations are rapidly shifting as technologies such as mobile, geolocation, social media and increasingly, Internet of Things devices and wearables, connect people to a world of easily accessible information and convenient services. With the ability to browse, compare and order with a few swipes and taps, consumers are becoming trained to value convenience and service above nearly anything else.

Gearing FMCG manufacturing for the red season spike and maximising profits all year round
25/11/2019 - 11:03
As we enter the festive season, demand for Fast-Moving Consumer Goods (FMCG) increases rapidly, often leaving manufacturers scrambling to fulfill orders from their distribution channel. If demand cannot be met, then loss of revenue is inevitable. However, over-production is not an ideal solution either, as it can leave manufacturers sitting with unsold stock that costs money to store.

Black Friday not necessarily a “black & white” decision for small business growth
25/11/2019 - 10:52
Black Friday, once only a North American marketing frenzy, has become a critical entry in the calendars of South African retail business owners.