2018-02-12

RCL - trading statement


Shareholders are advised that RCL FOODS expects that its headline earnings per share (“HEPS”) for the six months ended December 2017 is expected to be between 69.5 cents (+46.0%) and 79.0 cents (+66.0%) when compared to the reported HEPS of 47.6 cents for the six months ended December 2016 (“corresponding period”).

Earnings per share (“EPS”) for the six months ended December 2017 is expected to be between 72.0 cents (+93.5%) and 79.0 cents (+112.4%) when compared to the reported EPS of 37.2 cents for the corresponding period.

The corresponding period's financial results were impacted by the material once-off items listed below, which were detailed in the December 2016 results annoucement:
*An after-tax impairment of R102.7 million (excluded from headline earnings) relating to redundant plant and equipment identified following the decision to reduce commodity chicken volumes. The impact on EPS was a negative 11.9 cents.
*The recognition of a R37.4 million after-tax provision for restructuring costs and fair value adjustments on biological assets, also associated with the decision to reduce chicken volumes. The impact on HEPS and EPS was a negative 4.3 cents.
*A foreign exchange loss of R27.9 million (nil tax impact), relating to the settlement of the Zam Chick and Zamhatch options. The impact on HEPS and EPS was a negative 3.2 cents.

Excluding the above once-off items, HEPS for the six months ended December 2017 is expected to be between 69.5 cents (+26.1%) and 79.0 cents (+43.4%) when compared to the normalised HEPS of 55.1 cents for the corresponding period. Similarly, EPS for the six months ended December 2017 is expected to be between 72.0 cents (+27.2%) and 79.0 cents (+39.6%) when compared to the normalised EPS of 56.6 cents for the corresponding period.

The improvement in the underlying results over the corresponding period is mainly attributable to the Chicken business unit. Chicken benefitted from substantially lower feed input costs, higher IQF prices, and the positive impact of their revised business model implemented in the second half of the prior financial year, which focused on limiting the production of consequential commodity products. The Sugar business unit's result is materially down on the corresponding period, stemming from the negative impact that sugar imports have had on local market sales volumes.

Within the Groceries portfolio, margin and volume gains in Grocery and Pies offset volume pressure in the Speciality and Beverages business units. Lower commodity input prices assisted margins and drove an improved result for Animal Feed. Milling has made progress in regaining lost volumes, whilst labour issues disrupted progress in Baking.

The Logistics division's results are down on the corresponding period as a result of the reduced loads from the Chicken business unit following the implementation of their revised business model, however the implementation of various cost saving initatives have partially mitigated this impact. The Group's financial results for the six months ended December 2017 are expected to be released on SENS on 26 February 2018. The directors take responsibility for the financial information on which this trading statement is based, which has not been reviewed and reported on by the Group's external auditors.