RCL Foods reports uptick as chicken processing business improves

12th February 2018 By: Megan van Wyngaardt - Creamer Media Contributing Editor Online

South African food producer RCL Foods expects to report an upswing in its financial results for the six months ended December 31, with its headline earnings a share to be between 46% and 66% higher year-on-year at between 69.5c and 79c.

Earnings a share are expected to increase by between 93.5% and 112.4% year-on-year to between 72c and 79c.

Earnings increased despite an after-tax impairment of R102.7-million, the recognition of a R37.4-million after-tax provision for restructuring costs, as well as a foreign exchange loss of R27.9-million.

The improvement was mainly attributable to the chicken business unit, which benefitted from substantially lower feed input costs, higher individual quick-frozen prices and the positive impact of a revised business model that was implemented in the second half of the prior financial year, which focused on limiting the production of consequential commodity products.

The sugar business unit's result were materially down on the corresponding period, stemming from the negative impact of sugar imports on local market sales volumes.

Within the groceries portfolio, margin and volume gained in grocery and pies offset volume pressure in the speciality and beverages business units. Lower commodity input prices assisted margins and drove an improved result for animal feed.

The milling operations also made progress in regaining lost volumes, while labour issues disrupted progress in the baking business.

Meanwhile, the company noted that its logistics division's results were down on the corresponding period as a result of the reduced loads from the chicken business unit following the implementation of the revised business model; however, the implementation of various cost saving initiatives partially mitigated this impact.

The group's financial results for the six months ended December 31 will be released on February 26.