RCL Profit Drops on Milling Writedown; Drought Hurts Agricultureby
South Africa food producer says chicken, sugar units affected
Zambia unit profit, tax benefit curbs $48 million impairment
RCL Foods Ltd., South Africa’s largest chicken producer, said full-year profit probably fell as much as 80 percent after it wrote down $48 million in its milling business and the nation’s worst drought in more than a century hurt its sugar and poultry units.
Earnings per share were in the range of 0.20 rand ($0.01) to 0.30 rand in the year ended June 30 from 0.99 rand a year earlier, the Durban-based company said in a statement Thursday. The results will be released Aug. 30.
“The sugar and chicken business units have been adversely impacted by the worst drought in southern Africa in the past 100 years,” it said. “Chicken results have also been adversely impacted by the massively oversupplied poultry market as a result of surplus domestic volumes as well as record levels of dumped imports.”
South Africa last year had the least rainfall since records started in 1904, damaging crops and herds and raising food prices. Its farmers will need as much as 16.6 billion rand in the year through March to subsidize feed purchases, a study by the AGRI SA lobby group and others showed.
The milling unit recorded lower forecast cash flows in the period, resulting in a 642.8 million-rand impairment on goodwill and trademarks that reduced per-share earnings by 0.75 rand, RCL said. Profit was boosted by the release of a 163.3 million-rand provision for uncertain tax disputes as part of the producer’s purchase of New Foodcorp Holdings Ltd. and the recognition of profit from options to sell shares in its Zambian hatching operation.
The stock dropped as much as 6 percent, the most in more than a month, and was 5.3 percent lower at 14.20 rand at 1:53 p.m. in Johannesburg, giving the company a market value of 13.3 billion rand.
The company, formerly known as Rainbow Chicken, has since 2013 sought to move into sugar and other food products by acquisitions to reduce its reliance on meat.