South Africa’s RCL to unbundle and list Rainbow chicken arm

RCL Foods suggested the move will “enable both businesses to pursue their respective growth ambitions".

Andy Coyne March 04 2024

RCL Foods has announced plans to unbundle and list its Rainbow poultry business.

The South African food major said today (4 March) the move will “enable both businesses to pursue their respective growth ambitions and investment theses in a focused manner and with improved alignment on capital allocation priorities”.

Despite operating in a “tough trading environment” in which issues such as high input costs, load-shedding, or power outages, and a weak rand/dollar exchange rate have exerted pressure on prices and consumer demand, RCL produced a largely positive set of interim results for the six months to December 2023 with revenues up 8.4% year-on-year to R20.1bn ($1.05bn) and EBITDA up 48.6% to R506.8m.

RCL said the EBITDA hike was largely driven by Rainbow, which was up by 10.8% year-on-year to R276.7m, and sugar.

The company, which operates across a range of grocery categories and in pet-food, has been carrying out a strategic review of the business.

The unbundling of its Rainbow arm, which has received board approval, will lead to a concurrent listing on the Johannesburg Stock Exchange, However, local media outlet Business Day, quoted an unnamed source as saying a “meaningful amount of work” remains to be done on the planned unbundling.

Back in September, RCL, which owns brands including Selati sugar and Ouma rusks, announced its annual profits had plummeted by 45% year-on-year following a battering from the headwinds already mentioned and a sugar levy.

That same month it revealed its Rainbow arm had had to cull 410,000 chickens as a result of the country’s avian flu outbreak.

Commenting on its improved results today, RCL said its response to these challenges has been to focus on factors within its control: “restoring service levels and thus market shares, improving operational efficiencies, and cash preservation”.

It said: “These measures have started to yield improvements in volumes and profitability.”

CEO Paul Cruikshank said: “We remain committed to our overarching business strategy as previously communicated, which includes improving shareholder returns as we seek to grow what matters for all our stakeholders.

“I am pleased to say that we are on track with our strategy delivery plan for the 2024 financial year, supported by the rollout of our purpose across our value-added business.”

South Africa’s outdated energy infrastructure has seen the country’s industry suffer from repeated power outages and RCL said today that such load-shedding cost the business R76.1m during the period in question.

The Supreme flour and Sunbake bread manufacturer said price increases helped to partially offset some of the cost issues in its grocery business but that unit had a flat performance, which was partially offset by a volume recovery in its pet-food unit.

It said the expansion of Rainbow’s Hammarsdale processing plant was implemented successfully, which resulted in increased volumes and the creation of 346 direct and 143 indirect jobs. Full capacity at the plant is expected in July.

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