RCL Foods (formerly known as Rainbow Chicken) is a food producer in South Africa which manufactures and distributes a wide portfolio of branded and private food and pet food products. The company’s history spans over 120 years, during which it has managed to buy several prominent food producers such as the companies formerly known as TSB Sugar and Foodcorp.

The company today has three core divisions, namely the Consumer Division, the Sugar & Milling Division and the Logistics Division. Distribution is carried out through market supply chain specialist Vector. Employment stands at over 20 000 people.

Well-known brands controlled by the group include Rainbow Chicken, Sunbake, Pieman’s, Selati, Nola, Yum Yum, Ouma and Mageu, with products for sale to mainly the middle LSM sector.

Through various joint venture partnerships, the group has also expanded into Swaziland, Botswana, Zambia and Uganda.

RCL Foods shares are listed on the Johannesburg Stock Exchange (JSE) with a market cap of over R12 billion. RCL share price has struggled on the live online stocks chart, due to what management labels a ‘crisis’ within the poultry industry.

Having established a strong presence in South Africa, RCL Foods restructured its Rainbow business and gained a much stronger presence through the purchase of Foodcorp and TSB. Through the joint ventures in Africa, the group has achieved the first steps on its important strategy of geographic diversification. A varied portfolio of product categories allows RCL Foods to reach a wide range of consumers, which further contributes to cash flow and scale.

Although the group increased revenue by 8% to R25 billion for the 2016 financial year, results were constrained by challenging market conditions created by the drought, currency devaluation, inflation and pricing pressures caused by an oversupply of chicken imports. The year’s data indicated that headline earnings dropped by 11% to R849.7 million, with headline earnings per share dropping by 41% to 65.8 cents. Results were further affected by a R642.8 million impairment of the Millbake business unit (excluded from headline earnings) due to lower cash flows than forecast.

Results were boosted slightly by a more aggressive innovation drive to ensure enhanced offerings, and a strong focus on costs and initiatives to maximise production efficiencies. This resulted in the balance of the portfolio experiencing growth, although the major segments of sugar and chicken were excluded from this.

Performance and RCL Foods share price have been severely dampened by what the board labels as a crisis in the poultry industry, the group’s most important market. The company is reviewing its future buy in to this market, with the chicken business unit struggling to turn a profit. Other segments such as maize and sugar have also struggled as a result of increased raw material prices. Although the rest of the group looks fairly stable, RCL Foods shares have taken a dive on the stocks chart, and will likely remain a risky buy for the foreseeable future.

Consumer Staples

Consumer Products

Packaged Food

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