JSE-listed broiler producer RCL Foods on Monday said the decision to suspend anti-dumping duties on chicken importers may not have the desired effect of reducing the retail price of poultry for consumers.
The group, one of the largest poultry processors in the country, said that there is no evidence that chicken dumped by importers is actually sold at a cheaper price to South African consumers.
Importers on the other hand, according to the group will benefit the most from government’s latest decision.
“We are of a different opinion that the importers are really the ones that get the full benefit, there’s no cheap chicken on the shelf,” RCL Foods MD of Chicken, Marthinus Stander, said at the group’s results presentation briefing.
“We are obviously engaging with the minister to try and have those tariffs implemented earlier. He is the only one who can make that decision.”
Earlier this month, the local poultry industry expressed frustration with the Department of Trade, Industry and Competition’s (Dtic’s) move to pause the implementation of anti-dumping duties on bone-in chicken portions coming from Brazil (mainly), Denmark, Ireland, Poland and Spain, for 12 months.
The department justified its actions by saying that halting import duties on these countries will bring much-needed relief to the consumer who is currently battling an elevated inflationary environment.
But the industry disagrees.
“The [Dtic] minister attributes the suspension of the implementation of the anti-dumping duties to rising food costs, and the potential impact on poultry prices.
“However, the impact that the delay will have on poultry remains questionable as importers merely use the opportunity to profit on dumped imports,” the group said.
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No real impact on profits
Rainbow, which is currently undergoing a restructuring process which will eventually see it operating as a subsidiary of RCL Foods, reported a 214% rise in underlying earnings before interest, taxes, depreciation and amortisation (Ebitda) to R348.6 million, up from R111 million in the previous period, indicating a return to profitability for the division.
The improvements in Ebitda were largely supported by improvements in pricing, agricultural results and procurement gains, which according to the group, partially countered commodity cost increases.
Stander tells Moneyweb that although government’s move to halt import duties for some chicken importers will be damaging for the industry, the group doesn’t believe the decision will alter Rainbow Chicken’s operational outlook just yet.
“At this stage we have not made any adjustments just based on merely that decision, I think its early days. [But] yes, if the volumes of imports increase significantly it will have an impact on our ability to pass on costs [to consumers].”
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In line with this, the group says it is now consolidating the chicken business to prepare for future growth, part of which includes its R220 million capital investment that will go towards improving its Mpumalanga and KwaZulu-Natal (KZN) operations.
Recently, the group announced that it will be reinstating the second shift at the Hammarsdale P2 facility located in Mpumalanga.
The capital investment will go towards upgrading and installing new technology at this facility and towards reinstating one of its KZN broiler farms.
“Additional broiler volumes will largely be procured from emerging black contract growers, which will create jobs and significant opportunities for the surrounding communities.”
This article originally appeared on Moneyweb and was republished with permission.Read the original article here.
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