JSE-listed diversified food company RCL Foods’ revenue increased by 10.2% to R34.9-billion for the financial year ended June 30.

Earnings before interest, taxes, depreciation and amortisation (Ebitda) improved by 7.7% year-on-year to R2.59-billion for the year under review.

RCL declared a total dividend of 45c a share.

The company says the pleasing set of results demonstrate its resilience in a challenging operating environment and amid commodity input cost increases that continue to place margins under pressure.

RCL Foods CEO Paul Cruickshank noted during a presentation of the company's results on September 5 that the group maintained forward momentum despite a difficult operating environment, including consumers constrained with rising inflation and record unemployment and continued and “unprecedented commodity input cost increases that are placing producers and consumers under pressure”.

The company's response has been to maintain a strategic focus on controllable elements with sharpened strategy and prioritised operational execution on key imperatives, he said.

Ebitda growth was driven by continued momentum in the Sugar division; a return to profitability in the Chicken business, which is now referred to as Rainbow; and a solid performance in Vector Logistics.

Volumes have remained relatively stable across most categories and several value-added brands grew their market share.

Headline earnings per share (HEPS) increased by 9.9% to 118.6c and earnings a share (EPS) by 2% to 114c. EPS for the year were lower than HEPS largely owing to the post-tax impact of net impairments recognised, which is excluded from the calculation of HEPS, the company said.

Meanwhile, RCL Foods is making progress on its strategic transformation journey, aimed at creating a profitable, sustainable value-added business of scale, and to scale its core value-added component through sharper strategic focus and active investment, said Cruickshank.

“We are committed to growing our value-added business in a well-considered way. The previous Group and Food division executive teams have been consolidated into a single executive structure with a stronger operational connection that is driving improved strategic alignment. All these businesses are supported by our central functions and business services organisation,” said Cruickshank.

Further, in re-engineering the organisational structure to support the group’s value-added focus, RCL Foods has also revised its strategy with the vision of creating “a business of the right scale which has been built to last, with a diverse and high-performance culture that delivers category growth ahead of the market and enhanced stakeholder value”.

Its strategic pillars include a diverse, high-performance culture, and a business of the right scale that is built to last.

RCL Foods CFO Rob Field highlighted that the Ebitda margin decline of 0.6% was mainly owing to pervasive commodity input cost pressures, and the moderate decline was evidence of the resilient performance of the group given the significant input cost increases borne by business units.

Meanwhile, against the backdrop of a difficult trading year, Rainbow has done well to return to profitability as part of its turnaround plan, and Vector Logistics has delivered another improved set of results, aided by higher revenue and efficiencies, RCL Foods said.

Rainbow’s revenue increased by 10% to R11.38-billion, up from R10.3-billion in the financial year ended June 30, 2021. Underlying Ebitda grew by 214% to R348.6-million, albeit off a low base of R111-million in the prior period.

Improvements in pricing and agricultural results, procurement gains and buoyant quick service restaurant (QSR) sales helped to offset the cost impacts of commodity price increases and AI mitigation measures. The Simply Chicken value-added brand introduced several freezer-to-fryer innovations during the year, and Simply Chicken viennas continued to outperform the market with double-digit growth, the company said.

In Rainbow’s animal feed business, external Epol and Driehoek volumes were subdued in an over-capacitated local industry. High commodity prices also created significant margin pressure.

“We are acutely aware of the significant pressure on South Africans at this time and have sought to limit price increases as far as possible. We have driven efficiency and prioritised innovation in the value tier to provide cash-strapped consumers with affordable options in key categories,” said Cruickshank.

“We are also actively supporting our employees and their communities in the ongoing recovery from the Covid-19 lockdowns, unrest and flooding. Our Do More Foundation, which we established five years ago, is key to this and is making a significant and commendable impact in many vulnerable communities,” he added.

While acknowledging that volumes could be impacted by further price increases amid continued high commodity input costs, RCL Foods will continue to leverage its tiered portfolio and drive value innovation to support cash-strapped consumers.

“The Groceries business unit will focus on delivering on its strong innovation pipeline, including new value offerings, while managing margins and operating efficiencies. In the Baking business unit, the emphasis will be on building volumes in the northern region through the expanded Polokwane plant and extending into KwaZulu-Natal through the Sunshine Bakery business.”

Further, sugar demand remains robust and improved rainfall during the growing season bodes well for better cane yields and increased raw sugar production.

Meanwhile, in Rainbow, continued delivery of the turnaround plan is expected to yield further performance improvements. High commodity prices and delayed implementation of definitive antidumping duties against Brazil, Denmark, Ireland, Poland and Spain remain challenges for the 2023 financial year, Cruickshank said.

“Vector Logistics’ outlook for the next year is positive, although higher fuel costs remain a significant risk. The integrated network will further facilitate transport and warehousing efficiencies, and the business will leverage Empty Trips’ potential to create a more innovative, sustainable logistics industry.

“Our resilient portfolio and focused strategic execution have enabled us to deliver robust results despite turbulent market conditions in the past 12 months. We have also made strides in integrating a value-added mindset across the RCL Foods business, and will build on this in the coming year. Underpinning this will be our newly crafted Purpose and Sustainability Strategy, which together will act as our North Star in building a relevant, responsible and sustainable business,” Cruickshank said.