RCL Foods, South Africa’s largest chicken producer, said higher interest rates and rising unemployment will cut consumer spending, hampering efforts to build on improved earnings this year.
RCL’s net income almost doubled to 848.1 million rand ($63 million) in the year ended 30 June after it partly moved away from selling chicken by buying Foodcorp Holdings and units of TSB Sugar Holdings. A slowing South African economy will weigh on earnings, it said in a statement Tuesday.
“The burden of a constrained market, together with the expectation of rising interest rates, labor demands, electricity disruptions and continuing high unemployment is expected to hamper any sustainable improvement in consumer spending," RCL said. “These issues will have an impact across the segments in which the group operates.”
Tuesday’s announcement came after markets closed. RCL rose one per cent to 15.85 rand by 9:28 a.m. Wednesday in Johannesburg trading, paring the year’s drop to 18 per cent.
The company, formerly known as Rainbow Chicken, has since 2013 sought to move into sugar and other food products by acquisitions to reduce reliance on meat. The extra revenue from new units means cash flow will "remain robust" despite the difficult economic conditions, it said.
South Africa’s poultry industry is facing uncertainty due to the government’s decision to allow duty-free imports from the US, RCL said.
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