Table of Contents
Key points
- South African food giant RCL Foods expects a 75-percent increase in headline earnings per share for the fiscal year ending this month.
- Rainbow, set to be listed separately on the Johannesburg Stock Exchange by July, has improved its financial performance due to cost control measures, increased volumes, and lower input costs.
- RCL shareholders will receive one Rainbow share for every RCL share they hold, enabling both RCL and Rainbow to focus on individual growth plans and reflecting positive market confidence in Rainbow’s future.
RCL Foods, a leading South African consumer goods and milling company backed by South Africa’s richest man Johann Rupert, look forward to a substantial 75-percent increase in its headline earnings per share (HEPS) for the fiscal year ending this month.
This growth is driven by the strong performances of its Rainbow unit and the groceries business. In a statement released on Monday, RCL Foods stated that it expects HEPS from total operations to be at least 75-percent higher than the 68.3 cents reported a year ago.
The value-added business division, particularly the groceries segment, has shown great improvement. This is mainly due to the restoration of pet food volumes, which had previously been impacted by load-shedding-induced service level challenges. The recovery in pet food volumes, coupled with improved margins, has greatly contributed to the positive results in this segment.
Challenges in the baking division
The bread, buns, and rolls unit continues to face a competitive trading environment. This competition has led to both volume and margin pressure, affecting the performance of the baking division. The sugar division, on the other hand, has continued to deliver strong operational performance. This success is attributed to high international sugar prices, which have benefited the division significantly.
Rainbow, which RCL Foods is in the process of unbundling and listing separately on the Johannesburg Stock Exchange (JSE), expects its EBITDA performance in the second half to be broadly in line with the first half of the financial year, ending December 2023. The first half typically sees stronger trading due to seasonality, especially during the December festive season.
Factors affecting Rainbow’s performance
Several factors have positively influenced Rainbow’s financial performance in the second half of the fiscal year. These include benefits from cost control measures, an increase in retail and wholesale volumes, lower input costs, and the successful containment of the Avian flu outbreak.
RCL Foods owns several well-known brands, including 5 Star maize meal, Ouma Rusks, and Bobtail dog food. The company has strategically positioned these brands to maintain strong market presence and drive growth.
RCL Foods plans to release its annual results on Sept. 2. The anticipated increase in earnings reflects the company’s performance and initiatives to overcome market challenges and capitalize on growth opportunities.
RCL Foods’ expected 75-percent increase in full-year earnings shows the success of its focus on key business units and cost management, with strong results in groceries and sugar, and stable performance from Rainbow, positioning the company for continued growth and value for shareholders.
