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RCL Foods, which is majority-owned by Johann Rupert's Remgro, reported that full-year earnings growth fell by more than 40% as it battled input costs in its poultry business and saw load shedding severely hit production in its pet food segment.
The company said it had "weathered a tremendously difficult 12 months" with unrecovered cost pressure in its Rainbow Chicken business and the impact of load shedding casting a pall over the overall performance.
Specifically within the Rainbow unit, higher revenue driven by both higher volumes and prices were not enough to offset the "severe impacts of high feed costs, failing municipal infrastructure and load shedding", resulting in a 74.9% decline in underlying earnings before interest, tax, depreciation and amortisation.
While commodity costs remained the biggest contributor to margin pressure for RCL, load shedding had also added direct costs to its continuing operations of R158.3 million at a pre-tax level. The fallout from power interruptions was most keenly felt in its grocery business unit, with production in the company's pet food segment reduced by up to half from November 2022 to April 2023.
RCL said overall earnings before depreciation, amortisation and impairment were down 24.5% to R1.71 billion even as revenue growth increased 17.3% to R37.8 billion. Total headline earnings per share fell 42.4% to 68.3c. Headline earnings per share from continuing operations were down 45.7% to 60.6c. The group did not declare a dividend, either a final one or at the interim stage. Last year it paid a dividend of 45c per share to shareholders.
There were some positives though, particularly from the company's sugar business, Selati.
The company, which also owns Yum Yum peanut butter, Pieman's and Epol pet food, among others, said its sugar business managed to deliver a strong result, "driven by a combination of improved throughput; increased local sales and continued favourable export pricing". This was also even with the negative hit the group took because of a special levy that had to be raised by the South African Sugar Association from it and others as a result of producers Tongaat Hulett and Gledhow, which are both in business rescue, stopping some of their payments.
The performance of its baking business unit was largely in line with the 2022 financial year, despite lower volumes overall and margin pressure in its bread, buns and rolls operating unit.
