Durban / ZA. (rcl) RCL Foods Limited is a South African food manufacturer with nearly 16’500 employees producing 30 well known brands in the business divisions Groceries, Baking, Sugar and Chicken. Analogous to other companies around the globe, RCL Foods is experiencing the current market conditions as a tough challenge. Now the Group announced its financial results for the year ended June 30, 2023. Key headlines:
- Volumes and margins under pressure in a challenging trading environment
- Earnings materially impacted by sugar industry special levy
- Load-shedding impacts all operations
- Key Grocery brands continue to grow despite the market declining
- Strong underlying Sugar performance
- Rainbow turnaround hampered by high feed input costs
- Sale of Vector Logistics completed on 28 August 2023
RCL Foods has weathered a tremendously difficult 12 months, delivering a solid underlying performance in its core Value-Added Business while negatively impacted by continued unrecovered cost pressure in Rainbow. Group revenue from continuing operations of ZAR 37,8 billion was 17.3 percent higher than the prior year (2022: 32,2), mainly due to higher pricing necessitated by rising input costs. Earnings before interest, taxes, depreciation, amortisation and impairments (Ebitda) from continuing operations declined by 24.5 percent to ZAR 1711,5 million (2022: 2265,4), mainly driven by a decline in Rainbow and the fair value revaluation of RCL Foods’ shareholding in «The LiveKindly Collective International» business.
The Sugar business unit delivered a strong result with Ebitda growth of ZAR 62,4 million (7.6 percent) even after the impact of the sugar industry special levy of ZAR 234,4 million. This arose in the context of Tongaat Hulett Limited and Gledhow Sugar Company’s commencement of business rescue proceedings, the decision of Tongaat’s appointed business rescue practitioners to suspend payment of their statutory pre-commencement levies and redistribution payments to the South African Sugar Association (SASA), and the subsequent default of both Tongaat and Gledhow. This placed the burden on the remaining industry participants to cover the shortfall by means of a special SASA levy.
In an extremely challenging operating environment, agricultural commodity input costs remained the biggest contributor to margin pressure for RCL Foods, followed by load- shedding which added ZAR 158,3 million in direct costs to continuing operations in respect of diesel, generator hire and additional labour requirements. Consumer demand came under increased pressure amidst high unemployment levels (32.6 percent at the end of June 2023) and double-digit food price inflation during the period, as reflected in Statistics South Africa’s Quarterly Labour Force Survey and monthly Consumer Price Index respectively.
«Understanding the key role that our business plays in maintaining both food security and employment in South Africa, we have remained focused on «controlling the controllables» in order to deliver a stable profit while supporting cash-strapped consumers. We have done so through the careful management of price increases, innovation in the «value» tier and a focus on operational efficiencies. As a Group we are committed to being part of the solution for a more stable and prosperous future for all South Africans», says Chief Executive Officer Paul Cruickshank.
The directors resolved not to declare a final dividend due to the ongoing separation processes and external pressures impacting the Group. For additional details please read the company’s PDF file below (191 KB).20230904-RCL-FOODS-FY-2023