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More focus on dog food and less on sugar does the trick for RCL Foods

| Supplier news

A greater focus on more profitable products such as dog food brand Canine Cuisine rather than commodities like chicken and sugar helped RCL Foods to more than double its profit on a small drop in sales.

RCL Foods raised its interim dividend by 50% to 15c for the six months to end-December from 10c in the matching period.

The diversified food producer reported its interim after-tax profit more than doubled to R610m from R268m despite its turnover declining 2.4% to R12.8bn.

A standout product was Canine Cuisine, which increased its market share by 78% over the past year, RCL’s interim results released on Monday said.

The group said the prospects for its sugar division had improved thanks to the drought abating and the government heeding the industry’s calls for import protection.

RCL said its sugar crop improved by 30%, but prices suffered from cheap imports.

"An extended period of zero tariffs on sugar imports during the current period enabled significant imports into the market, including into bonded warehouses.

"The global sugar market continues to face surpluses, particularly in the white sugar market. These surpluses are largely due to Brazil’s production excesses and have resulted in steep price declines over the past year."

Regarding local poultry producers’ complaints about cheap imports, RCL said: "No solution or permanent measures have yet been proposed by government to restore the long-term sustainability of the South African chicken industry. There are, however, higher tariffs attached to the Brazilian imports, which have improved local pricing."

RCL said its poultry division had returned to profitability following its decision "to curb commodity-driven consequential chicken categories".

The group reduced the volume of chicken it produced by 18.6%, which was partly due to bird flu.

RCL said it lost about 5% of its chickens to bird flu, which cost it about R58m in the reporting period.

With the exception of beverages — which suffered from "sluggish consumer demand and a cool summer" — the group’s star performer was its grocery division.

"The grocery business unit performed pleasingly, with market share gains in several categories, including Nola mayonnaise, dog food [and] cat food, and has maintained a strong market share in peanut butter.

"Grocery launched several new products recently, including Yum Yum sachets and the Nola squeeze bottle. The new, state-of-the art pet food plant has been commissioned and an exciting range of pet food products will be introduced to market shortly."

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