RCL Foods resumes paying dividends

RCL Foods has reported a 31% jump in headline earnings from continuing operations, despite softer consumer demand.

The KwaZulu-Natal-based consumer goods and milling company reported group revenue from continuing operations for the year to end-June increased by 6.8% to R26bn, mainly due to higher sales pricing necessitated in response to sustained high input costs.

Earnings before interest, taxes, depreciation and amortisation (ebitda) from continuing operations increased by 36.8% to R2.3bn, mainly driven by a strong result in the group’s sugar business unit and the recovery of service levels in the pet food business within its groceries division.

Headline earnings per share (HEPS)  from continuing operations was up 31.0% to 121.6c, while total HEPS were up 108.1% to 142.1c.

“We are proud to have successfully delivered on two key objectives in our portfolio reshape, first with the disposal of Vector Logistics (in August 2023) and now Rainbow (on July 1) exiting the group to pursue its own value-creation course,” it said in a statement on Monday.

The Vector Logistics business was disposed of to EMIF II Investment, a subsidiary of Denmark-based AP Moller Capital. The Rainbow business, which was separated internally from RCL Foods in the 2022 financial year to prepare it for independent operation, listed on the JSE on June 26.

With Rainbow’s unbundling now complete, RCL Foods has resumed the payment of dividends and the board has approved a gross cash dividend of 35c per share.

The group said it expected the economic environment to remain challenging for consumers and food producers. Key downside risks included volatility in the rand-dollar exchange rate and commodity input costs remaining high, it said.

“While acquisition opportunities continue to be explored, a major focus in the coming year will be to unlock savings to manage the temporary overheads dyssynergy arising from the Vector Logistics and Rainbow separations,” it said.

A strong cash focus would remain crucial to enable investment in growth opportunities as and when they presented themselves. While market prices remained elevated, RCL found some recent recovery in market volumes encouraging.

“We will continue to focus on execution of front-end recovery programmes in grocery and baking, while shifting gear to drive strategic growth in speciality pet and exports,” it said.

“Despite being exposed to variables outside our control, such as the world sugar price, the sugar business anticipates improved agricultural yields and further cost saving initiatives will support results into the future, however, world market prices are expected to come under pressure in the forthcoming year.”

RCL said uncertainty around the future of the sugar industry in SA remained and it would keep supporting the SA Sugar Association (Sasa) and government in endeavours to ensure its long-term sustainability

mackenziej@arena.africa