RCL Foods swings into a loss as sugar tax bites
Chicken dumping also contributed to woes in the year to end-June, group says
RCL Foods, which owns Rainbow Chicken and Selati Sugar, said on Monday difficulties in its sugar and chicken business contributed to shaving off R1bn in profits in the year to end-June.
Record levels of chicken dumping and an adverse sales mix due to the imposition of a sugar tax prompted a 55% fall in cash generated by operations during the period, with the group reporting an after-tax loss of R184m, down from the prior period’s profit of almost R878m.
Headline earnings per share plunged 60.8% to 37.9c, with the group slashing its final dividend by 60% to 10c per share. This brings the group’s total dividend to 25c, from the prior period’s 40c.
SA’s economic environment remained subdued, with the group facing sustained pressure on its margins as it battled to hold on to market share amid declining prices for sugar and poultry, its statement reads.
Earlier in August the group said it had written down its sugar unit by R761.9m due to a bigger-than-expected effect from the imposition of the government’s sugar tax.
The tax resulted in a higher proportion of production needing to be exported at low international prices, it said at the time.
The group said on Monday dumped chicken, accounting for 25% of imports, remains a significant issue in the SA market, while feed costs also increased 11.2% per ton during the period.
Earnings before interest, taxation, depreciation and amortisation (ebitda) declined 54.1% to R214.3m, while ebitda for its sugar business plummeted 129.7% to a loss of R84.5m.
The group said it is pleased by the growth of its groceries portfolio, in which ebitda rose 23.4% to R639m during the period.
The company will continue to pursue its strategy of pursuing low production costs in its sugar and chicken divisions, it said.