RCL Foods reports 10.5% rise in interim revenue boosted by its diverse portfolio

SOUTH AFRICA – South African food producer RCL Foods has reported a 10.5% rise in half-year revenue to R15.7 billion (US$1.04 billion) from R14.2 billion (US$941m), largely driven by pricing in its sugar and baking products, upbeat milling volumes and strong performances in its Vector Logistics business.

RCL, which owns Selati sugar, Ouma rusks and Rainbow Chickens brands, reported headline earnings per share of 59.7 cents for the six months ended December 31 a rise of 12% from 53.3 cents last year.

“With Covid-19 mitigation strategies firmly in place, including careful management of working capital, RCL FOODS has been able to focus on its strategic transformation agenda with the aim of creating a more resilient business with more sustainable quality of earnings,” said Chief Executive Officer Miles Dally.

RCL, however, said its chicken division was affected by higher commodity prices and the Covid-19 pandemic.

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RCL Foods’ headline earning per share rose by 12% to 59.7 cents

In the context of significant pricing pressure and direct Covid-19 costs of R119.6-million (US$7.9m), statutory Ebitda held steady, declining by 3.1% against the prior, pre-Covid-19 period which also included a R110-million (US$7.2m) gain on bargain purchase arising from the ICL acquisition.

While chicken was impacted on by agricultural challenges, a foundation for recovery is gaining traction and the turnaround will be accelerated under the new dedicated structure and leadership team.

Strategic moves

To ensure a more competitive, profitable and sustainable performance within chicken, a decision was subsequently taken to establish the chicken business unit as a separate, focused division within RCL.

In parallel to this, a strategic review of the entire RCL portfolio is currently being carried out. The review, which the board announced in November 2020, is still in its early stages and will evaluate whether the collective portfolio is optimally configured to provide sustainable growth and continuous appeal to shareholders.

Rand Merchant Bank has been appointed to assist with an evaluation and review of strategic options as they relate to the composition of the underlying RCL basket.

Having strategically entered the plant-based foods category through a minority shareholding in the Live Kindly collective in January 2020, RCL and the collective have agreed to establish a local joint venture – Live Kindly collective Africa – which will market, sell and distribute all the collective’s brands in South and sub-Saharan Africa.

These include the South African Fry’s Family Foods brand and the international Like Meat and Oumph! brands.

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The joint venture will be finalised subject to approval by the competition authorities.

To achieve a sustainable sugar business, RCL Foods also welcomed the signing of the Sugar Industry Master Plan by government and industry stakeholders.

The master plan seeks to increase consumption of locally produced sugar, provide adequate protection against dumping and significantly diversify the sugarcane value chain.

Vector Logistics, meanwhile, having successfully integrated the ICL assets and related employees and entered into new agreements with several previous ICL customers, is currently working to consolidate the two separate distribution networks into a single, optimised, efficient network.

The newly built Rustenburg waste-to-value plant exported its first power to the chicken plant during the period under review and is currently ramping up its energy production, reducing both energy and water demand.

RCL has joined the international initiative to halve food loss and waste in the supply chain by 2030 and has also partnered with South African suppliers to support the post-lockdown restoration of the food service industry through the #OneMealManyThanks campaign.

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