RCL Foods, the branded foods, poultry and sugar group, did not declare a dividend in the six months to December 31 and does not foresee a lifting of the tight consumer environment in the short term, CEO Paul Cruikshank said yesterday.
The decision not to declare an interim dividend to preserve cash, despite lifting underlying headline earnings per share 21.6% to 62.2 cents, was taken because the separation of the Rainbow and Vector Logistics businesses were still in progress, commodity and other input prices remained high, and consumer trading conditions were tough, Che said in a telephone interview.
Group revenue increased 17.6% to R20.2 billion driven by higher pricing to counter rising input costs, and higher volumes in Sugar, Rainbow and Vector Logistics. Cruikshank said the sale of Vector was far advanced.
Earnings before interest, taxes, depreciation, amortisation and impairments (EBITDA) fell 8.9% to R1.18bn due to difficult trading conditions marked by high input costs, rising living costs for consumers and significant load shedding. High additional investment on energy was anticipated, he said.
“We have sought to deliver a stable rand profit and growth market share, while supporting cash-strapped consumers as far as possible, through value innovations and responsibly-managed price increases,” he said.
This meant balancing the need to protect margins with the pressure on consumers’ pockets. He said of concern was the fact that consumers were buying less food due to the pressure of their financial circumstances.
Service levels in the groceries and baking business units were affected by industrial action.
The journey to generate more consistent value for stakeholders continued, with a focus on value-added brands. The acquisition of Sunshine Bakery Holdings, finalised in February 2023, effective March 1, aimed to expand the business unit’s reach into the KwaZulu-Natal region.
The acquisition represented a good entry for the group into the market with lower priced products, said Cruikshank.
RCL Foods’ Value-added Business - comprising the groceries, baking and sugar business units - reported a 16.7% increase in revenue to R12 24bn, while EBITDA fell 4.6% to R978.3m, with volumes declining across most operations.
The groceries business unit had a solid performance despite being challenged by stage 6 load shedding and industrial action at its grocery and pies facilities.
The baking business unit was impacted by a slowdown in demand following price increases to counter high wheat and maize prices. Sunbake continued to make share gains in the retail channel.
The Sugar unit produced good results, driven by an increase in local market sales volumes aided by strong industrial channel growth, as well as more favourable local and export pricing.
The Rainbow business achieved a 19.2% revenue increase to R6.58bn, driven by higher volumes and pricing and an improved mix. However, Ebitda fell 110.5% to negative R6.1bn as a result of high commodity input costs, poor agricultural performance and load shedding impacts.
Vector Logistics’ revenue increased 17.2% to R2.14bn with food service volumes recovering beyond pre-Covid-19 levels and retail revenue growing despite supplier stock challenges.
Progress with the network consolidation of Imperial Logistics South Africa’s cold chain business and Vector Logistics realised further cost and scale benefits; however Ebitda of R165.6m was 9.1% lower due to cost pressures from load shedding, electricity price hikes, and higher fuel and insurance costs.
“RCL Foods’ tiered portfolio will be critical in providing affordable nutrition as part of its Value-Added growth strategy. While the outlook for Sugar is positive from a price and crop perspective, yields could be impacted if irrigation is reduced due to load shedding,” the group said.
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