Growing poultry crisis sees RCL Foods’ profit fall

The company expects its earnings per share (EPS) – profit made on each share – could fall by as much as 54% in the six months to 31 December 2016. RCL Foods, which claims to be South Africa’s largest poultry processor, said it expected EPS to fall by at least 37%, when compared on a like-for-like basis with the corresponding six months in the prior year.

The business has already been forced to cut over 1,000 jobs as the food group battles to rebalance its portfolio.

South Africa’s poultry industry has been under intense pressure​ over the past year, due to a combination of dumped imports and high feed costs. As a whole, the industry is now producing more chicken than South African consumers are buying.

Loss-making poultry​

To combat this growing problem, RCL Foods​ has downscaled its operations and limited production. Its Hammersdale operations have been reduced to a single shift and more than 1,000 staff have now been made redundant.

Restructuring has cost RCL Foods ZAR140 million ($10.3m) in what it called “abnormal items​”. This included tax impairments of redundant plant equipment, a tax provision and value adjustments on biological assets.

Away from the loss-making poultry operation, RCL Foods has had a markedly different performance, achieving trading profit growth despite foreign change volatility.

“We continue to make progress in moving towards a more balanced portfolio, which is positioning us as a stronger, more diversified business that is geared for growth,​” said RCL Foods CEO Miles Dally.

“This is evident in the performance of the rest of our businesses, excluding chicken,​” he added.

Dally noted that RCL Foods’ sugar and milling operations had performed well.

South Africa’s government​ has now launched a task force to end the chicken crisis. A number of recommendations around trade, financial support and competitiveness are expected to be made by the government in the coming weeks.