RCL Foods moves forward with Rainbow Chicken spinoff
South African company RCL Foods is making progress in spinning off its Rainbow Chicken business into a separate listed entity.
The plan has been in the works since 2021, when company veteran Paul Cruickshank was elevated to CEO and implemented a new strategy to focus on grocery segments including food for pets and baked goods.
RCL Foods, a branded and private label manufacturer supplying retail and foodservice channels, has already completed the sale of its Vector logistics business segment last August. The company has reversed its plan to exit its sugar activities in 2022.
Rainbow Chicken, as it is currently known, will be listed on the Johannesburg Stock Exchange with a target date of June 26. A more detailed prospectus will be published on June 10.
Existing RCL Foods shareholders will receive one Rainbow share for each share they hold in the group company. The shares in the so-called unbundling currently amount to more than 890 million.
“Rainbow has made significant progress in implementing its strategy to restore full-cycle profitability through a properly structured and sustainable operating foundation,” RCL Foods said in a filing today (June 4 ).
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“Rainbow’s responses, including the successful implementation of a chicken breed change, which was completed during the current financial year, and improved operational resilience to winds Significant opposites encountered recently, have significantly demonstrated the achievable benefits. an improved operational base.
Under the Rainbow brand, RCL Foods supplies fresh and frozen chicken, as well as value-added products, to retail and out-of-home channels.
Presenting first half results from March to the end of December, RCL Foods said: “Despite the negative impact of avian flu during the current period, Rainbow recorded an improved result thanks to the continued execution of the plan. recovery, which led to an improvement. in terms of agricultural performance and operational efficiency, coupled with higher volumes and margins.
“The board of directors believes that the unbundling of Rainbow will enable both companies to pursue their respective growth ambitions and investment theses in a targeted manner and with better alignment on capital allocation priorities.”
These results showed an 8.4% increase in group revenue from continuing operations to R20.1 billion ($1.07 billion). EBITDA increased by 48.6% to R1.51 billion and on an adjusted basis, by 32.4% to R1.43 billion.
Headline earnings per share (HEPS) rose 52.6% to 81.2 South African cents. Earnings per share (EPS) rose 67% to 90 cents.
In RCL Foods’ latest annual results published in September, the group highlighted the challenges posed by country-wide power outages, or load shedding, and pressures on Rainbow from rising raw material costs.
“RCL Foods has endured an extremely challenging year, delivering a strong underlying performance in our core value-added business, with the overall group result negatively impacted by continued unrecovered cost pressure at Rainbow.
“While agricultural input costs remain the main contributor to pressure on RCL Foods’ margins, load shedding added direct costs to ongoing operations of R158.3 million for the current year and also had a impact on service levels, particularly in our pet food operations.
The load shedding weighed on RCL Foods’ annual EBITDA result, which fell 24.5% to R1.71 billion. HEPS also fell, down 45.7% to 60.6 cents. EPS fell 39.2% to 69.3 cents.
“The Grocery business unit’s results were most affected by load shedding, which reduced pet food production by up to 50% from November 2022 to April 2023,” it was then reported. the company said.
“The result of the Bakery business unit is largely in line with that of the 2022 financial year, despite an overall decline in volumes and a compression of margins in the Bread, brioches and rolls business unit. »
