RCL Foods warns of muted demand as profits fall - Just Food
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RCL Foods warns of muted demand as profits fall

24 Feb 2017

RCL Foods, the South Africa-based poultry-to-peanut butter business, warned demand would remain "constrained" as it confirmed the fall in half-year profits it forecast earlier in the month.

RCL Foods, the South Africa-based poultry-to-peanut butter business, warned demand would remain “constrained” as it confirmed the fall in half-year profits it forecast earlier in the month.

For the six months to the end of December, RCL Foods booked profit attributable to equity holders of the company of ZAR321.7m (US$24.9m), down sharply from the ZAR736.7m it generated a year earlier. The company’s headline earnings per share were 47.6 cents, against 86.2 cents a year ago. Operating profit was ZAR355.5m, versus ZAR761.3m.

RCL Foods said its results had been “severely impacted” by the performance of its chicken unit. It pointed to the “widely reported poultry industry issues”, which it said had “decimated profits”.

The fall in profits came despite a rise in revenue, which increased to ZAR13.1bn from ZAR12.9bn, thanks to better sales from parts of its grocery business and from the company’s logistics arm.

“RCL Foods expects demand, and therefore volumes, to remain constrained,” the company said in a statement yesterday (23 February). “As a result, synergies, overhead savings and production efficiencies will continue to receive substantial focus. The group has a good pipeline of innovations across a number of product categories, designed to drive further market share gains.”

In August, RCL Foods warned South Africa’s “massively over-supplied” poultry industry was “in crisis”. Yesterday, it said: “The outcome of the chicken industry’s crisis remains uncertain but the group is satisfied that the South African Government is aware of the enormity of the matter, and the group has taken substantial corrective action to safeguard the business.”

It added: “The group remains confident in its strategy and are making steady progress towards our goal of a diversified portfolio, focused on adding higher margin, added-value products and categories. This set of results was characterised by significant external pressures.”