RCL Foods announces healthy half-year results

RCL Foods recently announced robust half-year results for the six months to DecemberȲ2022.

During this period, revenue increased 17,6% compared with the prior period to close at R20,2 billion.

According to Paul Cruickshank, CEO of the RCL Foods’ Group, the results were driven by higher pricing to counter rising input costs, amongst other measures.

The company said in a statement that earnings before interest, taxes, depreciation, amortisation and impairments (EBITDA) declined by 8,9% to R1,177 billion. This decrease was ascribed to exceptionally difficult trading conditions marked by high input costs, rising living costs for consumers and significant load-shedding.

“Focusing on the factors we can control in current conditions, we have sought to deliver a stable rand profit and grow market share, while supporting cash-strapped consumers as far as possible, both through value innovations and responsibly managed price increases. In so doing, our concern has been to balance the need for margin protection with the pressure on consumers’ pockets,” Cruickshank said in the statement.

Meanwhile, Rob Fields, RCL Food’s CFO, told Farmer’s Weekly that he expected the current challenges to persist over the short term.

“At the moment, there is very little opportunity for relief. [This is likely to continue] not only for the next six months, but for the rest of the calendar year. The fact is that there are no concrete plans from government in the pipeline that indicate any form of respite for primary producers, businesses or consumers,” he said.

Volumes and margins had come under pressure amidst persistently high agricultural commodity input prices and record levels of load-shedding, which had had a negative impact on production, and had added direct costs amounting to around R96 million during the period under review.

Moreover, service levels in RCL Foods’ groceries and baking business units were affected by industrial action.

Due to this and other challenges, RCL Foods’ directors resolved not to declare an interim dividend, in order to preserve cash while the group “repositioned its portfolio”.

Despite this, RCL Foods planned to press forward with strategic growth efforts in key categories. This included the acquisition of Sunshine Bakery Holdings Proprietary Limited in early 2023.

“At the moment, the entire value chain is under severe pressure, from the primary producer to the consumer,” said Fields.

“We have seen, for instance, a marked swing away from [the purchasing of] bread in favour of rice, [so that consumers can] make ends meet,” he added. –