SOUTH AFRICA – RCL Foods, one of SA’s biggest chicken producers, says it faces a bleak future as it lays off 1,355 workers — or half the workforce — at its large Hammarsdale operations in KwaZulu-Natal.
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 ($2.79m) after-tax provision for restructuring costs linked to the reduction in chicken volumes; an after-tax impairment of R102.7m ($7.65m) for redundant plant and equipment related to this, and a foreign exchange loss of R27.9m ($2.08m).
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.