South Africa’s RCL Foods grows half-year revenue 7.1% to US$930m

SOUTH AFRICA – The South African consumer goods and milling company, RCL Foods has reported an increase in revenue of 7.1% to R14.2 billion (US$930m) in its interim results for the six months ended December 2019.

Earnings before depreciation amortisation and impairment were up 7.7% to R1.2 billion (US$78.6m). Headline earnings per share went up 2.7% to 53.3 cents per share.

But not considering for material once-offs and accounting adjustments, headline earnings per share increased 23.8% to 63 cents. The improved profitability helped boost cash generated from operations by 20.8% to R842 million (US$55.1m), the group said.

During the period, RCL Foods, which owns sugar brand Selati, restructured its business into four units – groceries, baking, chicken and sugar.

The restructuring has aligned similar business activities and will optimise resource allocation and sharpen strategic focus, the group said.

The chicken division, which includes the Rainbow brand, was negatively impacted by pricing pressures resulting from an oversupply in the industry.

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Unadjusted ebitda for the period declined nearly 60% from R333.7 million (US$21.8m) reported in the previous period to R134.3 million (US$8.7m). 

Its sugar division particularly benefited from an increase in sales volumes, due to “higher raw exports and improved local and international pricing,” the group said. Ebitda for this division more than doubled to R306.5 million (US$20m). “Local sugar demand remains muted due to financial pressure on consumers and declines in consumption brought about by the implementation of the Health Promotion Levy (sugar tax).”

While the groceries division’s performance was “consistent”, the group’s baking division was impacted by “volume pressure and margin declines” as it could not cover its input cost increases.

The group’s logistics arm, Vector, acquired Imperial Logistics’ cold chain business (ICL) and its results included the R110 million (US$7.2m) gain on the purchase.

“Vector’s underlying performance (excluding the R110 million gain) was significantly down on the prior period, negatively impacted by higher costs associated with the take-on of new business and operating the combined Vector and acquired ICL networks from December 2019,” the group said.

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