Major South African food producer feels the pressure

In its first full-year results since unbundling Rainbow Chicken, iconic South African food producer RCL Foods has reported a mixed performance.

Boosted by efficiencies and cost savings, RCL Foods saw strong earnings and profit growth from its continuing operations, while its discontinued operations weighed on group results.

RCL Foods is one of South Africa’s leading food manufacturers, producing iconic brands such as Nola, Selati, YUM YUM, OUMA and 5 Star.

The company released its results for the year ended June 2025 on Monday, 1 September.

In its 2025 financial year, RCL Foods saw its revenue increase by a modest 1.8% to R26.5 billion, while EBITDA shot up by 11.4% to R2.56 billion.

The company’s basic earnings per share declined by 1.26% to 180.1 cents, dragged down by a significant decline in earnings from its discontinued operations.

However, basic earnings per share from continuing operations grew by over 19% to 158.7 cents per share.

The company’s discontinued operations in this period include Rainbow Chicken, which was unbundled and separately listed in July 2024, and Vector Logistics, which was disposed of in the 2024 financial year.

Overall, RCL Foods’ profit for the period remained flat at R1.65 billion, as the significant drop in earnings from discontinued operations offset strong 19% profit growth in continuing operations.

Positively, the company’s return on invested capital rose by 0.5 percentage points to 13%, which the company said was commendable within the context of a challenging operating environment and a constrained consumer.

“Volumes remain a challenge in a subdued food market, with the total food market reflecting declines averaging 0.4% across the 12 months,” the company explained. 

It said falling consumer sentiment, driven partly by uncertainty around global trade and political relations, contributed to the subdued consumer demand for food. 

It also pointed to continued lacklustre GDP growth in South Africa and sustained high unemployment rates as dampening consumer demand.

The company added that positive macroeconomic developments, including inflation moderating and interest rates declining and the introduction of the two-pot retirement system have yet to appreciably improve consumer demand.

Despite this, RCL Foods delivered a pleasing set of results, driven mainly by the strong turnaround in its Baking segment and improvement in the Groceries division. 

The group’s Sugar business also performed well operationally, but was subject to unfavourable market dynamics, such as lower global sugar prices and higher imports into South Africa.

However, the company explained that it was able to mitigate the impact of softer volumes by making a deliberate effort to restore margins that had been compromised over some time by pressures from input costs and load-shedding.

“Our results were achieved through the delivery of savings from our Net Revenue Management and Continuous Improvement initiatives, together with targeted efforts to protect market share in Groceries and Baking,” it said. 

“As a result, we were able to improve profitability and maintain strong market shares in key categories, a sign of our continued consumer relevance in the market and validation of our strategic and management focus.”

In addition, the company successfully refinanced its debt package, which expired in December 2024, at lower margins than the expiring package.

The company pointed to this as a positive sign of the financial market’s view of its evolving risk profile,

“The new debt package and our strong balance sheet position us well for funding growth initiatives going forward,” the company said.

On the bank of these results, RCL Foods approved a final cash dividend of 40 cents per share for the year-end June 2025, bringing the total dividend for the year to 60 cents per share.