DURBAN – Imports of sugar and chicken have put pressure on RCL Foods’ earnings in the six months to end-December, with the group reporting a decline of 26.3percent in headline earnings to R475.1million, down from R644.7m compared with last year.
The group said yesterday that its sugar business was particularly distressed by abnormally high dumped imports displacing local market sales, leading to an adverse sales mix.
“Chicken imports grew by more than 25 percent in the period, mainly from Brazil and the US, with only partial relief to the market’s oversupply position being provided by the reduction in volumes as a result of RCL Foods’ changed business model,” the group said.
RCL Foods added that dumped chicken imports remained a significant issue for, and a component of, the local poultry market, representing more than 25 percent of the market.
Sugar production volumes increased by 12.7 percent to 429466 tons, but earnings before interest, tax, depreciation and amortisation (Ebitda) for the sugar business were down 69.9 percent to R63.5m.
“Reduced domestic demand and the impact of cheap dumped imports resulted in increased exports at low prices. Market estimates were that the health promotion levy, or sugar tax, had reduced domestic sugar consumption by up to 10percent of the annual industry production, or 200000 tons a year,” the group said.
RCL Foods is a leading African food producer, operating across South Africa, Swaziland, Namibia, Botswana, Uganda and Zambia.
Group revenue increased by 3.5percent to R13.3billion, up from R12.8bn. Ebitda declined by 9.9percent to R1.08bn, down from R1.20bn compared with last year.
Headline earnings per share declined by 26.4 percent to 54.8cents a share, down from 74.5c.
The group declared an interim dividend of 15c a share.
Chief executive Miles Dally said the group’s well-diversified portfolio, low gearing and strong balance sheet had positioned it well despite the challenging trading conditions.
“The local economy is expected to continue to face economic headwinds and our goal of achieving a sustainable quality of earnings of a stable and diversified base remains key. To this end, we are pleased with the growth in the groceries and Millbake categories. However, our agricultural categories continue to be impacted by dumping,” Dally said.
The groceries business, consisting of grocery, beverages, pies and speciality, delivered double-digit growth in Ebitda, benefiting from volume and margin increases, and market share gains in several categories.
“We have entrenched a strong grocery portfolio with leading brands, which is generating solid results. We continue to grow our brands through consistent investment and innovation, which has sustained and grown market share positions. The performance of groceries is the testament to the success of this focus,” Dally said.
RCL shares closed 4.81percent higher at R13.50 on the JSE yesterday.