RCL Foods issues warning of 30% drop in profits in year to June
RCL FOODS yesterday warned its shareholders that its profits could fall at least 30 percent for the year ended in June as a result of the coronavirus (Covid-19) pandemic that has had a negative impact on two of its operations.
The group said the pandemic and the resultant nationwide lockdown by the government to contain its spread had a major impact on its business with headline earnings per share (Heps) now projected to decline by 11.4 cents from the 37.9c it declared during the corresponding period last year. “The chicken and Vector operations have been most affected, due to the shutdown of the quick-service restaurant industry,” the group said in a trading update.
RCL Foods operates across South Africa, Swaziland, Namibia, Botswana, Uganda and Zambia.
Last year, the group said its performance had been hit by the declining local market demand for sugary products as a result of the sugar tax.
It said chicken imports, particularly from Brazil and the EU, curtailed its earnings 60.8 percent during the year.
RCL produces a wide range of branded and private label food products, which it distributes through its own route-to-market supply chain specialist, Vector Logistics. The group also owns Rainbow Chicken as well as brands such as Five Star, Ouma and
Selati Sugar.
It said orders for its products plummeted after the government implemented the Covid-19 level 5 lockdown restrictions as restaurants were not allowed to operate during the period. However, since the beginning of June, restaurants were allowed for collections and deliveries under level 3 of the lockdown regulations.
“The lingering impact of the pandemic on consumer demand, as well as the sovereign downgrade earlier in the year will also necessitate an evaluation of the carrying values of the group’s assets for possible impairments,” the group said.
RCL said it would give further details on its performance as soon as it had a reasonable degree of certainty on the expected Heps and earnings per share ranges for the current financial year. But the group said it remained well capitalised and was managing liquidity as a priority during the pandemic.
The group is expected to release the full-year results in August.
RCL shares declined 0.11 percent on the JSE yesterday to close at R9.30.