RCL Foods reports surge in half-year earnings

RCL FOODS yesterday shook off the negative impacts of Covid-19 on its halfyear results by reporting a double-digit growth in earnings for the six months to end December, boosted by its diverse portfolio.

The group said that its revenue increased 10.5 percent to R15.7 billion for the six months to end December driven by higher volumes and improved prices in sugar and baking, improved milling volumes and the take-on of new principals in Vector Logistics following its acquisition of Imperial Logistics coldchain business.

It said headline earnings per share rose 12 percent to 59.7 cents a share but flagged that earnings before interest, tax, depreciation and amortisation (Ebitda) fell 3.1 percent to R1.13bn. However, underlying Ebitda increased 18 percent to R1.34bn.

The group took a hit of R119.6 million direct Covid-19 costs in its Ebitda during the period. It declared an interim dividend of 15c a share.

Chief executive Miles Dally said the major contributors to the group’s performance came from the sugar, baking and Vector Logistics segments.

“With Covid-19 mitigation strategies firmly in place, including careful management of working capital, RCL Foods has been able to focus on its strategic transformation agenda with the aim of creating a more resilient business with more sustainable quality of earnings,” Dally said.

The group’s chicken division business, however, came under pressure on continued challenges in agriculture as well as R100.7m supply chain relief and additional storage costs associated with the Covid-19 pandemic.

RCL said that it wanted to ensure a more competitive, profitable and sustainable performance within the chicken division and a decision was taken to establish the chicken business unit as a separate, focused division within RCL Foods. Experienced executive appointments have been announced to lead this initiative and accelerate recovery plans.

The food division increased underlying Ebitda 26.3 percent to R1.03bn, driven by strong performances from sugar and baking, including overhead cost savings.

The groceries business reported a 6.5 percent decline in underlying Ebitda to R301.6m. The baking business increased underlying Ebitda by 42.7 percent to R269.1m and the sugar business improved underlying Ebitda by 50.8 percent to R462.3m.

Dally said RCL Foods had a resilient portfolio with strong brands, a healthy balance sheet and strong cash flow generating ability.