SOUTH AFRICA – RCL Foods Ltd, a food processor and milling company in South Africa, has issued a profit warning on account of the persistent energy crisis in the country.

RCL Foods produces, markets and sells pet foods, grocery, milling, baking, fishing, beverage, chicken products, ready-to-eat products, and sugar and also provides various logistic services, such as sales solutions, warehousing and distribution and imports and exports.

South Africa has recently been plagued with severe power outages which have had severe negative effects across the entire retail value chain.

RCL Foods said in a stock-exchange filing, “As a result, margins came under pressure and price increases to recover cost-push [inflation] had to be carefully managed in order to protect volumes.”

They announced that their headline earnings per share (HEPS) are expected to decline by a range of 20.1% – 26.8% for the first six months of its fiscal year, translating from 72.7 South African cents (US$0.041) to 53.2 cents (US$0.030).

Alongside load-shedding implications, the company cited other factors that may impact their profit margins.

“Challenging market conditions persisted throughout the current period, with sustained high commodity input prices [and] above-inflationary price increases for other costs, particularly energy and packaging,” they said.

In the full fiscal year that ended last June, RCL Foods reported HEPS of 118.6 cents (US$0.067), a 9.9% increase from the previous 12 months. The EPS, however, was down by 1.9% at 115.5 cents (US$0.065).

These results are based on revenue of ZAR34.9bn (US$2.01bn), a 10.2% increase from the previous fiscal year.

The company recorded that its earnings before interest, taxes and depreciation (EBITDA) increased by 7.7% to ZAR2.6bn (US$147.3M) while their net profit increased by 10% to ZAR1.05bn (US$59.5M).

Many other companies have also raised concerns about the impact of load shedding, which is when Eskom, the public entity that supplies power to South Africa, reduces electricity consumption by switching off the power supply to groups of customers.

Companies like Astral Foods, one of the leading poultry producers in the country and owner of County Fair and Mountain Valley chicken brands, recently cited “abnormal additional costs” due to the country’s power problem and water infrastructure for its cautionary note on profits.

The company had previously announced that it expects a 90% plunge in mid-year profits.

Enterprises both large and small sized across all the agricultural subsectors have voiced their concerns about the impact of the prolonged power crisis situation in the country is having on the sector.

“The shameless demise of a number of State-owned entities that are responsible for supplying essential services and maintaining general infrastructure, is impacting business sentiment and reinvestment decisions for growth,” said Chris Schutte, Astral Foods CEO.

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