Shares in RCL Foods jumped sharply on Monday morning as the food producer reported higher earnings at the halfway stage of its financial year, largely due to gains in its groceries and baking divisions.
By 10.30am on the JSE, RCL’s shares were up 8.47% at R10.89.
The group reported revenue from continuing operations for the six months ended December was up 5.4% to R13.6bn, while earnings before interest, tax, depreciation, amortisation and impairments from continuing operations was 25.1% higher at R1.55bn.
Headline earnings per share (HEPS) from continuing operations grew 38.8% to 109.4c, it said in a statement on Monday. A dividend of 20c per share was declared.
Continuing operations relate to the remaining RCL Foods business, comprising the groceries, baking, sugar and group (shared services) segments, after the Rainbow unbundling effected in July 2024 and the disposal of Vector Logistics in the 2024 financial year.
RCL, whose brands include Ouma Rusks, Selati Sugar, Nola, Yum Yum, Dogmor and Catmor, said it delivered a “pleasing half-year performance” despite continued challenging market conditions.
The improved result was largely due to gains in groceries and baking, as well as a partial recovery of the additional levy raised by the SA Sugar Association in the 2023 financial year on the sugar business unit, as a result of Tongaat and Gledhow suspending payment of their industry obligations, it said.
Groceries benefited from a favourable product mix in pet food, improved margins resulting from lower raw material input costs, savings initiatives, production efficiencies and reduced load- shedding.
The baking business unit delivered an improved performance, despite muted volumes in most categories. A focus on continuous improvement and net revenue management initiatives, lower input costs and the suspension of load-shedding drove their improved result.
After consecutive years of record performance off a high base, sugar continued to deliver strong results, aided by continuous improvements in operational performance and reduced industry exposure to lower margin raw exports. Despite higher sales volumes, animal feed company Molatek was down on the prior period mainly driven by a less favourable sales mix and rising input costs.
The group said from a regulatory perspective, engagements with the departments of trade, industry and competition, and agriculture in respect of work on the Sugar Master Plan 2.0, are “positive and ongoing”.
While RCL is seeing volatile demand across most categories, improving macroeconomic factors are a positive sign and, if sustained, should translate into stronger demand over time.
However, it is likely that the consumer will remain under pressure for a period, and RCL envisages tough trading conditions to continue in the short- to medium-term.
“Therefore, we are cautiously optimistic that our improved trajectory will sustain itself through the second half of the financial year. We will continue to execute our growth plans, while enhancing our margins to offset the impact of any shortfall in volumes,” it said.
“We are optimistic about sugar’s continued strong performance, but are cognisant of lower international prices and increasing imports due to inadequate import protection. A hot and dry period towards the end of the 2024 calendar year could still pose challenges for the output of next season’s crop, however, recent rains have been a welcome relief,” it added.
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