RCL Foods saw a significant decline in earnings in the 2023 financial year as inflation, load-shedding, and a sugar levy weighed on its operations.
The Remgro-owned food manufacturer released its results for the year ended June 2023 today.
“RCL Foods has weathered a tremendously difficult 12 months, delivering a solid underlying performance in our core Value-Added Business with the overall group result negatively impacted by the continued unrecovered cost pressure in Rainbow,” the company said.
RCL Foods’ revenue for the period was up 17.3% to R37.8 billion compared to FY 2022, mainly due to higher pricing necessitated by rising input costs.
However, its EBITDA was down 24.5% to R1.71 billion, while underlying EBITDA – which excludes material once-offs and accounting adjustments – decreased by 11.0% to R1.97 billion.
The company’s total headline earnings per share (HEPS) were down 42.4% to 68.3 cents, while HEPS from continuing operations declined by 45.7% to 60.6 cents.
Total earnings per share also decreased by 39.2% to 69.3 cents.
The main contributors to this earnings decline were Chicken producer Rainbow (R312.3 million) and the fair value revaluation of the minority shareholding in The LIVEKINDLY Collective (R127.4 million).
“Within the Rainbow business unit, higher revenue driven by higher volumes and prices was insufficient to offset the severe impacts of high feed costs, failing municipal infrastructure and load-shedding, resulting in a 74.9% decline in underlying EBITDA.”
Whilst agricultural commodity input costs remained the most significant contributor to margin pressure for RCL Foods, load-shedding added direct costs to continuing operations.
RCL Foods said load-shedding cost the company R158.3 million (pre-tax) in FY 2023 and impacted service levels, especially in its Pet Food operations.
RCL Foods’ sugar business delivered a strong result with EBITDA growth of R62.5 million (7.6% increase) even after the impact of the sugar industry special levy of R234.4 million.
“Despite the negative impact of the special levy raised by the South African Sugar Association, the Sugar business unit delivered a strong result, driven by a combination of improved throughput, increased local sales, and continued favourable export pricing.”
RCL Foods’ board of directors opted not to declare a final dividend.