SOUTH AFRICA – RCL FOODS bounced back in the year ended June, reporting headline earnings from continuing operations of R964m from a loss of R333m last year.
The diversified food producer, which is 77.7% owned by Remgro, said the “defining change” in fortunes had been its strategy of doing business using a “one company approach”. It said despite “challenging economic conditions” its recent acquisitions and restructuring initiatives were bearing fruit.
The group had previously operated its subsidiary entities as Foodcorp, Rainbow Farms, TSB and Vector. The Vector logistics business continued to operate as a stand-alone entity, ultimately responsible for all of the group operations route-to-market, RCL Foods said.
But the rest had been structured into business divisions labelled “Consumer” — which included Rainbow and Foodcorp’s grocery, beverage, pie and speciality food divisions — and “Sugar and Milling”, which included TSB, Rainbow’s animal feeds unit Epol, and Foodcorp’s milling and baking divisions.
CEO Miles Dally said on Tuesday the results were “very good” and management was “very pleased” with them. He said the performance of Rainbow and the inclusion of TSB in reporting had made all the difference.
Group revenue rose 20.1%, largely due to the inclusion of a full 12-months of TSB earnings. That meant earnings before interest, tax, depreciation and amortisation (ebitda) for RCL Foods shot up 98.2% from R1.1bn to R2.2bn, as the overall margin rose from 5.8% to 9.5%.
But the comparative results were “materially compromised” by exchange losses incurred on Foodcorp’s euro-denominated debt, the group said.
RCL Foods said due to the effect of corporate transactions last year, its pro forma results published in August 2014 had been included this year for purposes of further comparison.
“The results were sweetened by sugar and succulent chicken profit recovery — these two alone added R842m, or 58% of RCL’s operating profit and countered the near stagnation in the core Foodcorp grocery and Vector logistics division,” Anthony Clark, a food industry analyst at Vunani Securities, said on Tuesday.
“The RCL Foods results were bulked up by the inclusion of TSB into 2015 results, as well as a significant recovery in profit and margin at Rainbow Chickens,” he said.
But he said the core Foodcorp business had performed “very poorly” as competitor activity and a seven-week strike in the speciality grocery unit saw operating profit rise by a “meagre” 3%.
RCL Foods said that while the restructuring was effective from January 1, the group management accounting systems required to enable overall reporting would be implemented only in the 2016 financial year.
“Therefore RCL Foods will report its segmental information on the historical basis for the 2015 financial year.”