In its latest report covering the six months to December of 2023, RCL Foods summarizes its overall performance as “pleasing,” despite a number of ongoing challenges.
For its continuing operations — comprising Value-Added and Rainbow — revenue for the period was up 8.4% year-on-year at 20.1 billion rand (ZAR; US$1.08 billion).
Expressed as Earnings Before Interest, Taxes, Depreciation, Amortization and Impairments (EBITDA), reported profit was up by 48.6% at well over ZAR1.5 billion. At almost ZAR1.44 billion, underlying EBITDA was 32.4% higher than in the same period of the previous year.
Among the on-going challenges to its businesses, RCL Foods cited the continued high cost of inputs, disruptions to the power supply (“load-shedding”), adverse developments in ZAR:US$ exchange rates, and weak consumer demand. Direct costs of load-shedding alone cost the group more than ZAR76 million, it reports.
Under these difficult trading conditions, the company focused its efforts on maintaining service levels and market share, improving operational efficiency, and cash preservation.
RCL Foods’ Value-added division comprises business units covering groceries, baking, and sugar. Its other operation, Rainbow, is a leader in the poultry and animal feed markets.
In recent days, RCL Foods announced its intention to separate its Rainbow business, having sold the Vector Logistics segment in August of 2023.
Double-digit revenue increase for Rainbow
At almost ZAR7.29 billion for the six months to December of 2023, revenue by RCL’s poultry and feed business was 10.8% higher than in the same period of 2022.
Underlying EBITDA increased more than three-fold to around ZAR287 million, driven by improved bird performance, higher volumes, and cost control measures. However, load shedding and avian influenza (AI) outbreaks adversely impacted both performance and fiscal results.
The firm reports the successful expansion of its processing facility at Hammarsdale. As a consequence, throughput was increased, and almost 350 direct jobs were created. By July of this year, the plant is scheduled to be operating at full capacity.
AI outbreaks and strong market competition also adversely impacted Rainbow’s animal feed business during the reporting period. In contrast, there was an improvement in margins on third-party sales.
Furthermore, the group reports improved performance by Matronox, its 50%-owner waste-to-value operation.
Prospects for South Africa’s poultry sector
In its half-year financial report, RCL Foods comments on recent and ongoing developments in the national poultry industry.
Despite investment in capacity expansion, it reports slow progress on the Poultry Sector Master Plan, which aims primarily to raise South Africa’s chicken production. Investment of ZAR600 million by Rainbow and its growers has doubled processing capacity at the Hammarsdale plant. However, the company has called for more support from the government to access new export markets.
The firm reports that antidumping duties on chicken imports from Brazil, Denmark, Ireland, Poland and Spain were finally implemented in August of 2023.
In order to ensure adequate supplies of chicken on the domestic following a series of AI outbreaks in South Africa, the International Trade Administration Commission recommended that limited rebates should be applied to duties on frozen poultry imports. South Africa’s poultry industry is opposing these changes, stating that adequate domestic supplies have been maintained.
One month ago, the country’s Competition Commission launched an investigations into alleged anticompetitive behavior and price manipulation in the nation’s broiler and egg markets. Rainbow confirms that it will participate in the inquiry, and submit its comments for consideration by the authority.
More on RCL Foods
RCL Foods produces some of South Africa’s most popular food brands, according to the group’s web site, as well as specialty and private label ranges.
Brands produced by its Rainbow operation include Simply Chicken, Rainbow chicken, and Molatek and Epol animal feeds.
Headquartered in Westville, Durban, RCL Foods’ current two divisions — Value-Added and Rainbow — have a workforce of more than 16,000 people across eight provinces.
Production of 197 million birds per year makes RCL Foods’ Rainbow the second largest poultry company in Africa, according to WATTPoultry.com’s Top Poultry Companies survey.
