RCL Foods warns against another profit slump
SOUTH AFRICA – RCL Foods Ltd, a South African food processor and milling company, has issued another profit slump warning as the company projects its profits for the 12 months to June to be at least 30% lower than the previous year.
According to a trading statement issued on the Johannesburg Stock Exchange today, the processor said when its financial results for the year are released in September they will likely show its headline earnings per share and earnings per share down by nearly a third year-on-year.
“Headline earnings per share are expected to be at least 35.6 South African cents lower than the prior year’s 118.6 cents while earnings per share are expected to be at least 34.2 cents lower than 2022’s 114.0 cents,” RCL said.
RCL Foods said the expected decrease is mainly driven by a special levy raised by the South African Sugar Association (SASA) on the group’s sugar business unit, the significant impact of load-shedding across all operations in the current period and unrecovered feed costs in its Rainbow chicken business.
“The South African sugar industry is in a state of significant uncertainty since the commencement of business rescue proceedings by Tongaat Hulett Sugar and Gledhow Sugar Company,” it added.
As a consequence, RCL also noted that the remaining industry participants have had to bear additional costs in the form of a special levy imposed by SASA to cover the resulting shortfall.
The load-shedding it refers to is the practice of the state imposing regular electricity blackouts to save energy as supply levels dip. This has had a marked impact on the country’s food manufacturers.
This is the second RCL Foods’profit warning of the year, having previously predicted a decline in earnings in February.
In March, RCL Foods revealed its fiscal H1 earnings had tumbled as commodity and energy costs weighed on its profits.
The South African chicken processor reported a 21.8% slide in profit attributable to equity holders of the company to US$28.20m while operating profit was down 20.7% at US$35.65m.
“The continued high levels of load-shedding have forced the RCL Foods group to consider further investing in energy self-sufficiency, which is expected to come at a significant cost.”
Earlier this year RCL invested US$34.3m in its Hammarsdale plant, west of Durban, to restore the plant to full capacity.
The investment comprised a combination of RCL Foods’ investment into its own Rainbow Chicken Processing plant and Hatchery and a third-party investment by contract growers to increase the supply of chicken in the facility.
Last month, the South African chicken processor revealed a 21.8% slide in profit attributable to equity holders of the company to US$28.20m while operating profit was down 20.7% at US$35.65m.
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