RCL Foods has revised up its earnings projections for the year ended June and now expects headline earnings per share (HEPS) to more than double.
The KwaZulu-Natal-based consumer goods and milling company said improvements in the groceries segment, Rainbow business, as well as the sugar division profited from continuous efficiency improvements and increased prices in both the local and export markets, had helped the company’s performance.
HEPS — which strips out exceptional and one-off items — from total operations are expected to rise as much as 112.6% to 145.2c from 68.3c a year earlier, RCL Foods said in a trading statement on Wednesday
The bumper earnings growth exceeded the 75% growth it had indicated in June.
Business Day previously reported that the groceries division results improved mainly due to the restoration of pet food volumes after load-shedding challenges in the prior period, combined with improved margins.
Its baking business remained under pressure, due largely to the performance of the bread, buns and rolls unit that continued to operate in a highly competitive trading environment leading to volume and margin pressure.
Remgro-owned RCL is one of SA’s biggest food companies and owns an assortment of brands, including Yum Yum peanut butter, Ouma rusks, Sunbake bread, Selati sugar, 5 Star Super maize meal and Rainbow chicken. It also produces pet food and animal feed.
Valued at R8.5bn on the JSE, the group has been reshaping its portfolio since 2020 with a focus on growing its value-added branded business, while separating its Rainbow and Vector Logistics businesses. The latter unit was sold in the first half of the current period.
In March, the board, chaired by Jannie Durand, decided to proceed with Rainbow’s official separation through an unbundling and a parallel listing on the JSE.
The board said it was of the view that the unbundling of Rainbow would enable both businesses to “pursue their respective growth ambitions and investment theses in a focused manner and with improved alignment on capital allocation priorities.”
On Wednesday RCL reported that because the effective date of the unbundling was July 1, the Rainbow financial results for the year to June would form part of its annual results for 2024.
It said Rainbow’s underlying earnings before interest, taxes, depreciation, and amortisation (ebitda) — an alternative measure of profitability — for the 12 months was expected to be between R650m and R690m, compared with the prior year’s R86m.
After the Vector sale and Rainbow unbundling the remaining RCL Foods business comprises groceries, baking, sugar and group shared services segments.
RCL shares were trading 1.04% higher at R9.70 on Wednesday and have climbed 12.8% since the start of 2024.
Rainbow shares were 0.9% weaker at R3.40 and are down 9.9% over the past 30 days.
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