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Africa|Business|Environment|Export|Health|Imperial-Logistics|Logistics|Service|Sustainable
Africa|Business|Environment|Export|Health|Imperial-Logistics|Logistics|Service|Sustainable
africa|business|environment|export|health|imperial-logistics-company|logistics|service|sustainable

Chicken, sugar volume growth boosts RCL’s interim revenue, earnings

2nd March 2020

By: Marleny Arnoldi

Deputy Editor Online

     

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JSE-listed consumer goods company RCL Foods grew its underlying headline earnings per share (HEPS) for the six months ended December 31, by 23.8% year-on-year to 63c.

RCL again declared a 15c a share dividend for the six months.

The company stated in a release on Monday that a revenue increase of 7.1% year-on-year to R14.2-billion was driven by good volume growth in the chicken and sugar segments, while prices also improved in the sugar segment, and consistently strong performance in the groceries segment was recorded.

RCL said the chicken segment was, despite the volumes growth, still being negatively impacted on by market oversupply and agricultural challenges.

As part of the company’s drive to secure sustainable quality of earnings in a volatile and competitive environment, it restructured its Consumer and Sugar & Milling divisions into a single Food division.

“This restructuring has established four business units that are closely aligned and integrated. This provides a solid foundation for further synergies, optimising resource allocation and sharpening our strategic focus,” CEO Miles Dally said on Monday.

Within the Food division, Sugar’s underlying earnings before interest, taxes, depreciation and amortisation (Ebitda) increased by 142.4% off a low base to R294-million at a margin of 7.8% in the six months under review, compared with a margin of 3.6% in the prior comparable six months.  

Dally pointed out that sugar had benefited from higher raw export sales volumes and prices, a local price increase and better cost control.

Local demand was muted in the reporting period, owing to pressure on consumer spending and lower consumption, which was, in turn, owing to the Health Promotion Levy, or sugar tax.

“We support the development of a sugar industry master plan and are working with all role-players to review the sugar operating model to further reduce industry costs and find a sustainable solution,” said Dally.

In a difficult trading environment with increased competitor activity, RCL’s Groceries division continued to perform well, fuelled by an exceptional performance in pet food, which had its basket grow 2.3%, ahead of the market.

Chicken’s underlying Ebitda decreased 10.8% to R198-million at a margin of 4.2% in the six months under review.

Dally said chicken imports continued to displace locally produced chicken in an oversupplied market, and although the Poultry Industry Master Plan was progressing, anti-dumping measures were yet to be implemented.

Results were consequently affected by softened pricing amid higher feed costs and agricultural challenges.

In the company’s Logistics division, Vector Logistics’ underlying Ebitda declined by 80.5% to R17-million, mainly driven by enablement costs associated with the recent acquisition of Imperial Logistics South Africa’s cold chain business, ICL, without the commensurate revenue for the period.

RCL said the formation of new service agreements with previous ICL customers and an ability to synergise duplicate networks positioned Vector well to realise the customer model strategy and sustainably grow going forward.

With a view to securing its future while establishing competitive advantage in a fast-changing world, RCL secured a minority shareholding in Foods United Incorporated (FUN), a startup international entity with a vision to create a vertically integrated plant-based food and beverage value chain of scale, with global reach.

FUN’s pioneering vision was to create a vertically integrated, plant-based food and beverage ecosystem that ranged from farm to fork, at scale and at speed, with global reach.

RCL’s  investment in FUN is expected to progress the company’s strategic imperative of growing through strong brands in the strategically targeted category of plant-based alternatives, and particularly in the fast-growing ‘alternative protein’ segment.

Participating in this category would help RCL meet consumers’ desire for added choice in the context of a diverse and growing population, while still remaining focused on its core chicken businesses.

“With our Food division restructure at senior management level complete, we look forward to a sharpened strategic focus, collaboration and synergy going forward.

“We had a clear set of priorities and strategic imperatives to deliver on for the second half of the year, and sustained focus and clarity would be key. We were well placed to continue to see and do things differently and maintain the momentum generated to close out a strong 2020,” noted Dally.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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