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August 24, 2020

Another profit warning from South Africa’s RCL Foods

RCL Foods, the major South African manufacturer, has announced another profit warning ahead of the planned publication of its annual results next week.

By Dean Best

RCL Foods, the major South African manufacturer, has announced another profit warning ahead of the planned publication of its annual results next week.

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What’s the forecast for the food and grocery industry?

The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
by GlobalData
Enter your details here to receive your free Report.

The company expects the headline earnings per share it generated in the year ended June to be between 11.2 and 16.2 South African cents, a decline of 57.2-70.4% on 12 months earlier.

In June, RCL Foods, home to brands including Rainbow chicken and Sunbake bread, then forecast a 30% fall in HEPS.

RCL Foods, in its new trading statement, issued on Friday (21 August), said the expected slump is “largely attributable to the negative impact of the Covid-19 pandemic and national lockdown”.

It insisted: “Excluding this impact, RCL would have delivered a meaningful growth over the corresponding period. Importantly, RCL finished the current period in a strong cash position with healthy underlying cash generation.”

On a reported earnings per share basis, the company is expecting to file a loss of between 101.8 and 104.3 cents due to impairment charges filed after a review of assets. A year earlier, the group generated EPS of negative 12.7 cents.

RCL said it carried out the review in the wake of the “impact of the pandemic on global economies”, which it said had “exacerbated in South Africa’s case considering its already weak economic fundamentals”. A total impairment of ZAR1.51bn (US$88.5m) has been recognised on “property, plant and equipment, goodwill and trademarks in the current period”, the company added.

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Free Report
img

What’s the forecast for the food and grocery industry?

The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
by GlobalData
Enter your details here to receive your free Report.

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