RCL Foods reports strong interim earnings, announces unbundling of Rainbow business

SOUTH AFRICA- RCL Foods, a JSE-listed consumer goods group, has announced a 48% year-on-year increase in Earnings Before Interest, Taxes, Depreciation, And Amortization (EBITDA) to R1.5 billion for the six months ending December 31.

The company reported an 8.4% increase in revenue from continuing operations, reaching R20.1 billion. Profits from the sale of the Vector Logistics business and positive fair value adjustments in commodity raw material procurement positions contributed to this growth.

Underlying EBITDA, excluding one-off items and accounting adjustments, recorded a significant 32.4% year-on-year increase, amounting to R1.43 billion.

Headline earnings per share (HEPS) from continuing operations rose by 52% to 81.2 cents, while earnings per share (EPS) increased by 67% to 90 cents. Total operations saw HEPS grow by 43% to 80.8 cents, and EPS increased by 108% to 119.8 cents.

According to the company, the Rainbow and Sugar divisions were major contributors to the group’s underlying EBITDA. Despite the negative impacts of Avian Influenza, the Rainbow division delivered impressive results.

Despite lower crop yields, the Sugar division reported an almost 50% increase in EBITDA, reaching R732 million.

Higher market prices offset the impact of lower local sales, exports, and production throughput. Initiatives are underway to address sugarcane yield challenges due to flooding and the impact of load shedding.

RCL Foods invested R524 million in capital expenditure during the reporting period. The return on invested capital increased to 6.8% in the six months under review, compared to 5.9% in the prior period.

Looking ahead, RCL Foods anticipates soft consumer demand due to cost pressures, load shedding, and a weaker rand.

Commodity input prices, while moderating from historic highs, remain elevated. Bread volumes and margins are expected to face pressure in an oversupplied local market.

Despite these challenges, RCL Foods remains focused on balancing volumes and profitability across all operating units.

Meanwhile, RCL Foods plans to separate the Rainbow business through an unbundling to shareholders and a concurrent listing on the JSE.

The move is part of the company’s strategic review to enhance focused growth and improved capital allocation priorities.

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