RCL interim earnings to drop as load-shedding intensifies

RCL Foods, which makes Nola mayonnaise, Yum Yum peanut butter and Ouma rusks, says headline earnings for the halfyear to end-December will be at least 20% lower than the previous period due to load-shedding and higher commodity prices and packaging costs.

The company expects headline earnings per share (Heps) to be 53.2c-58.1c, compared with 72.7c in the same period a year earlier, with its baking and poultry divisions (Sunbake bread, Supreme Flour and Rainbow Chicken) hit hardest.

Global maize, which is used in animal feed, and wheat prices have rocketed since Russia invaded Ukraine in February 2022, while “unprecedented levels of load-shedding added to the cost base”, RCL said.

Many companies have spent hundreds of millions of rand on diesel to power generators to keep their factories and shops open during Eskom’s rotational blackouts. Food producers, in particular, have struggled to pass on higher input prices to costsensitive consumers out of fear of declining sales.

RCL said it had managed price increases “to protect volumes”, meaning not all additional costs were added at the retail level.

Astral, the largest producer of chicken in SA, recently reported that it was costing more to produce chickens than it could sell them for, thanks to load-shedding disruptions.

RCL’s half-year results are expected on March 6.

The decline in earnings comes after Rainbow Chicken — RCL’s biggest segment by revenue — returned to profitability in its 2022 financial year. Operating profit at the division came in at R89m in 2022 after a loss of R209m in 2021, as it shrugged off higher input costs, an outbreak of bird flu and the floods in KwaZulu-Natal in April.

The group is preparing to separate Rainbow into a standalone unit.

RCL shares closed down 1.96% at R10 on Thursday. /With

Nico Gous