South African sugar manufacturing giants RCL Foods, Tongaat Hulett expect rise in full year earnings

SOUTH AFRICA – RCL Foods, South African consumer goods and milling company expects its profit for the year ended June 2021, to exponentially rise by as much as 592%, boosted in part by strong recovery in sugar and baking segment.

The owner of Selati sugar, Ouma rusks and Rainbow Chickens brands, indicated in a trading update that it expects its headline earnings per share to be at least 90 cents compared to 13 cents a year ago on a recovery in sugar and baking.

Meanwhile, its earnings per share would be at least 90 cents, 187 percent stronger compared to a negative 103c of the comparative period.

“The expected improvement in the group’s results is mainly driven by a strong recovery in sugar and baking as well as Vector Logistics, and a continued solid performance from grocery. Chicken continues to focus on its turnaround plans, which should deliver benefits in the next financial year,” said RCL.

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The recovery in sugar comes as the government and industry stakeholders signed the Master Plan to support the sustainability of South Africa’s sugar industry in November 2020.

South Africa’s sugar master plan targets to increase the portion of local supply in the market to 95% by 2023

The Master Plan aims to, among other things, increase consumption of locally produced sugar and provide adequate protection against dumping from international sugar-producing countries, while regulating the Health Promotion Levy.

According to the road map, at least 80% of sugar consumption in the country is targeted to come from South African farms and millers during the first year. This will increase to 95% by 2023. 

RCL established a standalone chicken business during the half year ended December 2020 in a bid to enable a dedicated focus on chicken.

Also, the company formed a plant-based joint venture with US-based alternative foods supplier LIVEKINDLY Collective, building on sustainable food system and enhanced consumer choice.

Meanwhile, Sugar producer Tongaat Hulett, is also expecting its earnings for the year ended 31 March 2021, to be substantially higher than last year due to the R3.3 billion (US$231m) profit on disposal of the Starch, Namibia and Eswatini operations.

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At the same time, its headline earnings (which excludes this R3.3 billion (US$231m) profit on disposal) will be substantially lower than the previous year.

This, the JSE listed company, has attributed to the significant impact of COVID-19 on the ability to conclude land sales which affected the profitability of the property business; and reduced profits from the starch business which only contributed for 7 months of the current year and was affected during those months by the alcohol ban during the lockdown.

Raw sugar production in South Africa reduced by 10% to 535 000 tons as the lockdown delayed both the season start-up as well as commissioning of Tongaat’s second milling line at the Maidstone sugar mill.

These factors, among others, negated the good operational progress and strong market share gains in the sugar operations, as well as continued progress with the overall business turnaround strategy.

Progress was also made with restructuring the balance sheet with cumulative debt reduction proceeds of c.R6.0 billion received as at 31 March 2021.

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