South African manufacturer RCL Foods has warned the market its profits for the 12 months to June are likely to be at least 30% lower than the previous year.
It is blaming a number of factors including a levy on its sugar business and ongoing energy shortages in the country which have impacted production levels.
It is RCL Foods’ second profit warning of the year, having previously predicted a decline in earnings in February.
In a trading statement issued on the Johannesburg Stock Exchange today (5 July), the Supreme flour and Sunbake bread manufacturer said when its financial results for the year are released on 4 September they will likely show its headline earnings per share and earnings per share down by nearly a third year-on-year.
Headline earnings per share are expected to be at least 35.6 South African cents lower than the prior year’s 118.6 cents while earnings per share are expected to be at least 34.2 cents lower than 2022’s 114.0 cents.
RCL Foods said the expected decrease is “mainly driven by a special levy raised by the South African Sugar Association (SASA) on the group’s sugar business unit, the significant impact of load-shedding across all operations in the current period and unrecovered feed costs in Rainbow [its chicken business]”.
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It described the South African sugar industry as being in a “state of significant uncertainty” since the commencement of business rescue proceedings by Tongaat Hulett Sugar and Gledhow Sugar Company.
As a consequence, the remaining industry participants have had to bear
additional costs in the form of a special levy imposed by SASA in
in order to cover the resulting shortfall.
RCL Foods said the net impact of the levy to date on the business is R234m ($12.5m).
The load-shedding it refers to is the practice of the state imposing regular electricity blackouts to save energy as supply levels dip. This has had a marked impact on the country’s food manufacturers.
In March, RCL Foods revealed its fiscal H1 earnings had tumbled as commodity and energy costs weighed on its profits.
It booked a 21.8% fall in profit attributable to equity holders of the company to R512.2m. Operating profit slid 20.7% to R647.7m.
The company said the ongoing separation of its Rainbow and Vector Logistics units had also impacted on its results.
On energy blackouts it said: “The continued high levels of load-shedding have forced the RCL Foods group to consider further investing in energy self-sufficiency, which is expected to come at a significant cost.”