Durban - RCL Foods's chicken business unit has taken steps to reduce volumes by initiating a programme to reduce its Hammarsdale operation to a single shift to avoid more job losses.
The company said the local market had remained under pressure as a result of the substantial increase in dumped product that has occurred in recent years.
The company’s financial director, Rob Field, said South Africa may not be able to survive the magnitude of the dumping as some companies have already started slowing production as a result.
Field said poultry companies had continued to engage the government on the problems.
“Some of the small producers have left the poultry industry already, so there have been massive job losses,” Field said. “However, we remain confident that the government and other stakeholders will find a solution to this problem so that we can have a sustainable industry in the future.”
The scrapping of duties on US chicken imports in June last year opened the door to chicken imports from the European Union and Brazil.
Lost jobs
Field said that since the beginning of the year, more than 3500 workers in the industry have lost their jobs, adding that more were set to follow.
On Friday, RCL Foods said its earnings before interest, taxes, depreciation and amortisation (Ebitda) depreciated 21.9 percent to R900.4 million for the six months ended December 31, compared to a profit of R210.9 million a year ago.
The company said total volumes came down 8.5 percent to 165757 tons for the period.
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Field said RCL Foods had strengthened its resolve to speedily implement a new business model which would include the reduction of its Hammarsdale operation, in KwaZulu-Natal, to a single shift from the beginning of March. This would eliminate a portion of loss making individually quick frozen (IQF) mixed portion product, which declined 50 percent over a three-year period.
The total cost of implementing these strategic actions in the current period would amount to R194.1 million, comprising a R142.2 million impairment to the fixed asset base, as a consequence of the downsizing, predominantly in the IQF space; a R42.9 million provision for restructuring costs and R9 million in biological assets write-downs, directly related to the reduction in the size of flocks and bird numbers at Hammarsdale in anticipation of moving to a single shift.
RCL Foods’ other business units performed better with the Sugar & Milling division excelling with Ebitda increasing by 20.7 percent to R578.2 million.
On Friday, RCL shares slipped 1.27 percent to close at R15.50 on the JSE.