RCL’s deals take a bite of its earnings

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BR Rainbow Chicken 5442[1] Independent Newspapers RCL Foods's Rainbow poultry division experienced a modest recovery despite tough trading conditions, especially in the individually quick frozen category. Photo: Supplied

RCL Foods was slowly starting to take shape and would be ready to compete with other local food manufacturing groups after a year of acquisitions and restructuring, its chief executive, Miles Dally, said yesterday.

For 2015, RCL was looking forward to further restructuring its business, as well as possible investments to grow the group’s portfolios.

“Our approach is now a one company philosophy and how to leverage… the infrastructure and technologies we now have through all the acquisitions,” Dally said.

RCL has had its hands full with the completion of the Foodcorp acquisition and the purchase of TSB Sugar Holdings last year.

“RCL Foods is building an African food business of scale with compelling brands and a sustainable value chain that delivers to consumer and customer needs,” Dally said.

However, the changes came at a price, as RCL Foods reported a headline loss from continuing operations of R332.6 million for the year to June from a profit of R18.8m.

Dally said this was affected by corporate activities including the Foodcorp and TSB deals, as well as accounting charges for the group’s black economic empowerment restructuring process.

The inclusion of the new businesses boosted revenue by 95.1 percent to R19.7 billion. The group’s earnings before interest, tax, depreciation and amortisation increased by 146.6 percent to R1.1bn with its associated margin rising to 5.6 percent from 4.4 percent.

Dally said RCL was able to transform into a food company in a short space of time.

“We have gone from a R10bn business to a R22bn business,” he said, adding this had created a great platform, which the group could use as leverage.

“Now it is the right time to drive into other value-added categories and invest more in other portfolios, as we now have a significant brand portfolio in which some brands are market leaders,” he said.

RCL owns Nola Mayonnaise, Ouma rusks, Rainbow chicken and Selati sugar, among other brands.

RCL’s Foodcorp division traded below expectations amid tough trading conditions and constrained consumer spending.

The group’s grocery, beverage and speciality divisions performed better than its baking and pie divisions.

“We have to act smarter and by doing that we have just replaced management in our baking division and we are already starting to see improvements. We are also working on our pie division,” Dally said.

However, some aspects in the poultry division, such as high imports of individually quick frozen (IQF) chicken pieces, still keep Dally awake at night.

The Rainbow division experienced a modest recovery in difficult trading conditions, with overall profitability and margins continuing to be negatively affected by high imports.

The division was also affected by constrained consumer spending and record feed costs.

Dally said the area of focus for its Rainbow division would be in the food solution area, which would serve quick-service restaurants such as Nandos, KFC and Chicken Licken.

“We have good relationships and we are the biggest supplier into this category.”

It was becoming too costly to compete within the IQF category because of the high imports and feed costs associated with growing chickens.

RCL shares rose 0.06 percent to close at R15.71 yesterday.


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