It says the South African chicken industry faces "severe challenges" from dumped imports and high chicken-feed input costs due to drought. This will see headline earnings per share plunge between 54.1% and 36.9% in the six months ended December compared to the same period in 2015.
"The chicken business unit has initiated a programme to reduce its Hammarsdale operations to a single shift... eliminating a portion of unprofitable IQF [individually quick-frozen] product," the group said in a trading update on Tuesday.
The update included three abnormal items: R37.4m aftertax provision for restructuring costs linked to the reduction in chicken volumes; an after-tax impairment of R102.7m for redundant plant and equipment related to this, and a foreign exchange loss of R27.9m.
Scott Pitman, MD of the group's consumer division, said on Tuesday it was selling farms in the Hammarsdale area. He said the government was in talks with the domestic poultry industry to try to resolve its problems. "This looks promising [but] until then the industry is in dire straits," he said.
However, the group said that excluding the unprofitable chicken business, its other operations, including sugar, baking and groceries, had seen a growth in profit for the period.
"We continue to make progress in moving towards a more balanced portfolio, which is positioning us as a stronger, more diversified business that is geared for growth," CEO Miles Dally said on Tuesday.
On Monday, RCL Foods said chicken industry bosses and workers would mark "a day of misery" and march to the EU Delegation headquarters in Pretoria on Wednesday to protest against alleged dumping.
Meanwhile, the EU Delegation said on Tuesday the crisis in SA's industry was not its fault. The EU's ambassador to SA, Marcus Cornaro, said the media "were barking up the wrong tree" over a "complex phenomenon" which included the industry being untransformed and uncompetitive.
"Regarding SA and economic transformation, growth remains sluggish at best and unemployment is persistently high," Cornaro said.
He talked up the benefits of free trade with the EU, even as new US President Donald Trump sets about imposing trade barriers.
"There is a temptation to succumb to protectionism," Cornaro said. He said the EU remained the dominant source of foreign direct investment into SA, accounting for 350,000 jobs. To this end, he said the Economic Partnership Agreement SA ratified with the EU in late 2016 was a strong endorsement by the country of additional avenues for trade and jobs.
Source: Business Day
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