PICK OF THE MONTH
RCL Foods: It's time for a nibble
The lull in the consumer market may create opportunities for corporate action
Investors keen to nibble on the JSE’s food sector certainly are spoilt for choice when it comes to consumer brands conglomerates. Pioneer Foods, where highly rated CEO Phil Roux has suddenly retired, and Rhodes Food Group, which has taken a bruising in its international operations, have both weakened to levels that offer lots of longer-term value flavour. Then there is AVI, which staged a remarkable second-half comeback, finding the balance between volume and pricing. This ensured gains in market share in key categories without the gross profit margin being ravaged. Its earnings outlook seems fairly steady, which means investors, can look forward to a sumptuous dividend policy of 80% of earnings distributed to shareholders, should there be no major acquisition. However, IM punts Remgro-controlled RCL Foods as the month’s pick — mostly based on a gut feeling that the company has built a sufficiently lean and mean operational structure to allow earnings growth in the year(s) ahead. RC...