01 Sep 20 Covid-19 takes a bite out of RCL, but it’s not all bad
RCL Foods has reported a big drop in full-year earnings with hefty impairments due to local economic woes and the impact of Covid-19.
RCL Foods owns the Selati sugar and Rainbow and Farmer Brown’s chicken brands. It also has extensive groceries and baking operations that make everything from mayonnaise and peanut butter to pies, buns and rolls.
It said the impact of Covid-19 and the resultant lockdown was most significant on its Chicken division and Vector Logistics largely due to the closing of quick service restaurants. However, the branded food procedure says its Groceries and Pet Food businesses continued to deliver strong performances, while its Sugar division made a pleasing recovery.
This resulted in a big loss of revenue in what are largely fixed cost businesses, a significantly higher stock holding of chicken and an increase in associated costs. The group also incurred additional costs to keep people safe from Covid-19. Its Beverages and Pies divisions were also affected.
RCL Foods said direct additional costs from the pandemic amounted to R267-million. Considering SA’s already weak economic fundamentals, it conducted an evaluation of the carrying values of its assets for possible impairments, booking a charge of R1.5-billion due to a lower forecast of growth into the future and the lingering impact throughout its business.
Revenue rose 7.4% to R27.8-billion for the year to end-June and earnings before depreciation, amortisation and impairment charges increased by 7.2% to R1.64-billion. Headline earnings per share fell 66% to 13c and it reported a basic loss of 103c per share. Cash generated by its operations more than tripled to R2.57-billion and it’s paying a final dividend of 10c, maintaining its total divided for the year at 25c per share.
The brighter moments
RCL Foods said it reached a few milestones during the pandemic, including record bread sales per week of 4.9-million loaves, the highest daily cane crush ever at its Komati sugar mill and a flour production record at its Milling division. Its Pet Food brands also registered all-time market share highs.
“The diversity within our portfolio is providing the necessary resilience to maintain a reasonable level of profitability in uncertain times,” the company said. “The business has been functioning well and we are confident that the business has come through the worst of the disruptions.”