Our opinion on the current state of RCL

RCL is a large producer of food, sugar products and chicken in South Africa which is owned 80.4% by Remgro. The company owns a number of very well-known South African brands such as 5 Star maize meal, Farmer Brown and Yum Yum peanut butter. It competes with overseas imports of sugar, chicken, and other foods. It was impacted by the listeriosis outbreak which damaged the market for processed meats and caused costs estimated at about R158m. The company has been impacted by the weak economy, low consumer spending and high unemployment. The company, through the SA Poultry Association is petitioning the International Trade Administration Commission (ITAC) for an 82% increase in the tariffs on imported chicken. In its results for the year to 30th June 2023 the company reported revenue up 17,3% and headline earnings per share (HEPS) down 42,4%. The company said, "RCL FOODS has weathered a tremendously difficult 12 months, delivering a solid underlying performance in our core Value-Added Business (underlying EBITDA up 10.8%) with the overall Group result negatively impacted by the continued unrecovered cost pressure in Rainbow". We regard this company as a well-managed company. The share has made a clear upside break above its long-term downward trendline on 25th January 2021 at a price of 848c. It has since risen to 1092c despite considerable sideways movement. On 2nd December 2020, the company announced that Remgro had increased its stake by buying 100m shares at R8,05 each. On 29th March 2023 the company announced that it had sold Vector Logistics for R1,25bn.