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RCL reports full-year loss as result of costs relating to corporate activity

RCL reports full-year loss as result of costs relating to corporate activity

Photo by Duane Daws

28th August 2014

By: Leandi Kolver

Creamer Media Deputy Editor

  

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JSE-listed RCL Foods on Thursday reported a headline loss from continuing operations of R332.6-million for the financial year ended June 30, compared with a profit of R18.8-million previously, with results having been significantly impacted on by one-off costs relating to corporate activity.

The operational loss for the year translated into a headline loss a share of 47.7c, compared with headline earnings a share of 4.8c during the 2013 financial year.

RCL CFO Rob Field explained that the 2014 results had been impacted on by the redemption of RCL subsidiary Foodcorp’s euro-dominated senior secured notes at a premium, which crystallised material foreign exchange losses, as well as by the restructuring of black economic-empowerment shareholdings, which resulted in material International Financing Reporting Standards 2 charges.

In addition, costs relating to the buy-out of the remaining 35.8% minority interest in Foodcorp, the acquisition of TSB Sugar South Africa and a R790.1-million pro rata minority rights offer, also contributed to the losses, he said.

Field noted that, had these costs not occurred, and had TSB been included in the RCL results for an entire year, as opposed to only for six months, the group would have achieved headline earnings from continuing operations of R385-million.

Meanwhile, RCL’s revenue for the 12-month period increased 95.1% to R19.7-billion, largely owing to the inclusion of Foodcorp for the full period and TSB for six months.

Similarly RCL’s headline earnings before interest, taxes, depreciation and amortisation increased 146.6%, from R447.2-million to R1.1-billion, with the associated margin increasing from 4.4% to 5.6%.

DIVISIONS
RCL CEO Miles Dally noted that the group’s results for the period were also impacted on by its Rainbow division, of which the results, despite having improved, remained depressed, as well as TSB’s six-month results that had been compromised by a high level of imports, the three-month off crop season from January to March and the impact of a strike in the sugar industry.

During the final six months of RCL’s financial year, TSB achieved an operating profit of R79.5-million and an operating margin of 3.2%, while its revenue reached R2.48-billion.

TSB MD John du Plessis also noted that, as a result of the factors mentioned, the sugar producers output was dropped to 190 000 t of sugar, compared with the 246 000 t produced during the prior comparative period.

Meanwhile, Rainbow MD Scott Pitman noted that Rainbow’s R99.4-million pre-IAS 39 operating profit for the year was significantly up on the loss of R12.5-million of 2013.

“This is despite feed costs being up 9.8% to a new record high, little change to dumped imports, and the industry consequently remaining in crisis,” he said, stating that Rainbow’s improvement was mainly owing to the implementation of a new business model.

He stated that the introduction of new tariffs and antidumping duties would potentially benefit the poultry industry going forward, although not much improvement had been seen to date.

Further, RCL’s Foodcorp business posted net revenue from continuing operations of R7.8-billion for the year, up 6%, while operating profit at R455.2-million was below expectations, but in line with that of the prior year at a margin of 5.9%.

Within Foodcorp, the grocery, beverage and speciality divisions performed well, while the milling division performed in line with the prior year, Foodcorp MD Cliff Sampson said.

He noted, however, that the baking and pie divisions’ performance was lower than that of the prior year.

He added that both these divisions were receiving focused management attention, with the bakery division specifically having started to show an improved performance during the fourth quarter of the financial year under review.

Meanwhile, the group’s Vector distribution business’ sales volumes remained under pressure during the year, as a result of the subdued economic environment in South Africa, Vector MD Chris Creed noted.

The business’ total revenue increased 15.1% during the period to R1.7-billion, with “pleasing growth” from the primary transport and bulk storage divisions.

FUTURE
Dally stated that sustainable improvement in consumer spending was unlikely to take place during the next year, which would impact on all RCL’s segments.

Further, TSB was expected to achieve a good production season, while the redemption of Foodcorp’s euro-denominated debt had removed the significant foreign currency valuation volatility, resulting in a more stable and lower cost of funding.

Dally added that, following the company’s focus on creating RCL between 2012 and 2014, the group would focus on creating value during the 2015 financial year.

RCL would focus on generating growth, while also improving margins, he said, stating that RCL was aiming to double its business in five years, while driving a steady and sustainable improvement in its operating margin.

In South Africa, specifically, RCL would focus on growing ahead of the market in certain categories, while investing in growth opportunities, while in the rest of Africa, the group would build its base by entering into joint ventures with food or route-to-market players, while also forming strategic partnerships with its South African customers that also had an African footprint.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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