The South African food major revealed on 4 March that it intends to separate and list its Rainbow poultry business, allowing both entities to focus on targeted growth strategies and align capital allocation priorities more effectively.
Despite facing challenges such as high input costs, power outages, and exchange rate fluctuations, RCL Foods reported positive interim results for the six months ending December 2023. Revenues increased by 8.4% year-on-year to R20.1bn ($1.05bn) and EBITDA rose by 48.6% to R506.8m.
RCL attributed the EBITDA growth to the performance of Rainbow, which saw a 10.8% year-on-year increase to R276.7m, along with its sugar business. The company, engaged in various grocery and pet-food categories, has been conducting a strategic review of its operations.
The unbundling of its Rainbow division, approved by the board, will result in a concurrent listing on the Johannesburg Stock Exchange. However, further work is required to complete the unbundling process, according to local media outlet Business Day.
In September, RCL reported a 45% year-on-year drop in annual profits due to challenges like high input costs, exchange rate impact, and a sugar levy. During the same month, its Rainbow division had to cull 410,000 chickens in response to the avian flu outbreak in the country. Addressing these challenges, RCL focused on factors under its control: improving service levels, operational efficiencies, and cash management.
CEO Paul Cruikshank emphasized the company’s commitment to its business strategy, aiming to enhance shareholder returns and stakeholder growth. RCL highlighted the impact of South Africa’s energy infrastructure issues, stating that load-shedding cost the business R76.1m during the period.
The company mentioned that price increases helped mitigate some cost challenges in the grocery business, although performance remained flat. However, the pet-food unit showed a volume recovery that partially offset this flat performance. RCL successfully expanded Rainbow’s Hammarsdale processing plant, leading to increased volumes and job creation. Full capacity at the plant is expected by July.
