RCL’s sugar business takes strain
By Siseko Njobeni - Aug 29th 2018, 13:21
"The government should do more to shield food and sugar producers from the influx of cheap imports," says RCL Foods CFO Rob Field.
Given the vulnerability of the two sectors to cheap imports, RCL has shifted investments away from commodity-type production to higher-margin quick-service for the fast food market, Field said after the company released strong results for the year to June.
Local producers could not compete with imports on price. "They can land their products here at prices below their cost of production. Government must give us a level playing field. We are efficient producers," he said.
RCL’s sugar business also took strain from cheap imports.
RCL said an increase in imported sugar offset higher sugar production and improved efficiencies.
"The need to establish import parity to quell imports and excess supply drove significant local price decreases of more than 20% during the period."
Field said the imports displaced local production volumes, forcing a change in the sales channel mix towards higher exports at lower international prices, leading to significant margin erosion.
RCL reported a 52.7% increase in headline earnings to R837.7m, from R548.5m. Headline earnings per share were up 52.4% to 96.8c.
Field partly attributed the company’s strong performance to a recovery in the chicken business following a restructuring, which entailed reducing production from 4.8-million birds to 3.4-million birds.
As a result, the company significantly cut commodity chicken sold to retailers.
The chicken business also had to contend with the outbreak of listeriosis and avian influenza. RCL estimated the financial impact of the listeriosis crisis at R158.2m, which included costs for product recall and the restoration of the Rainbow brand.
"Given that we have never had listeria in our products at our Wolwehoek plant and have subsequently been cleared of the ST6 ‘outbreak strain’ of listeria, we have been working to restore consumer trust both in our Rainbow brand and the chilled processed meats category," the company said.
RCL’s total revenue declined 2.1% to R24.4bn because of reduced volumes in the restructured chicken business.
The company declared a final dividend of 25c per share, compared to 20c in the 2017 financial year. The total dividend for the year was 40c, up from 30c in 2017.
RCL would continue with its "cautious" expansion into the rest of Africa, mainly in Southern Africa. It said it was cautious of economic and political risks.Business Live
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