Owner of Ouma Rusks and Yum Yum sees big profit boost - but its chicken business is struggling

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RCL expects its chicken division to be a separate legal entity from the second quarter of the 2022 financial year.
RCL expects its chicken division to be a separate legal entity from the second quarter of the 2022 financial year.

RCL Foods has seen a rebound in its performance, but its chicken business continues to be a challenge. 

The Rainbow Chicken and Simply Chicken brands owner also owns brands such as Ouma Rusks, Yum Yum peanut butter and Selati sugar, in addition to a logistics business.

On Monday, in its annual results for the year ended June 2021, the company reported that its earnings had shot up by 47% to R2.5 billion. Its revenue increased by 14% to R2.4 billion, while its headline earnings grew by 736% to R958 million.

By midday, its share price rallied by more than 12% to R11.02.

The group, which is declaring a dividend of 30 cents per share - an increase from 2020's 10 cents - attributed its performance to its sugar, baking and groceries businesses. Its Vector Logistics business has also showed a major improvement: from a loss in 2020, it reported a 143% jump in its underlying earnings to R290 million.

However, its chicken business saw its earnings halve to R99 million, from R198 million. 

"The underlying result was mainly impacted by continuing breed-performance challenges, significant raw material cost increases and the lingering impacts of the initial Covid-19 lockdown, compounded by mitigation costs related to the industry-wide challenges of avian influenza and, to a lesser extent, Salmonella enteritis," said RCL.

In November 2020, the group announced that it was embarking on a strategic review and has since decided to consolidate its food division, made up of the groceries and baking businesses, while creating a standalone chicken division. The company expects the chicken division to be a separate legal entity from the second quarter of the 2022 financial year.

RCL’s board decided that separating the businesses will be better for the group.

"Going forward, our intention is to unlock growth in the FMCG [fast moving consumer goods] component of the business through sharper strategic focus and active investment, to identify value-creation opportunities and to scale into adjacent and new categories, both organically and through acquisition activity. We are actively evaluating opportunities in this regard," said RCL Foods CEO, Miles Dally. 

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