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RCL FOODS – FINAL RESULTS JUNE 2019

Revenue from contracts with customers increased to R25.888 billion (2018: R24.528 billion), operating profit before depreciation, amortisation and impairment (“EBITDA”) decreased to R1.526 billion (2018: R2.046 billion), operating loss came in at R29.3 million (2018: profit of R1.270 billion), loss for the year attributable to equity holders of the company rose to R110.5 million (2018: profit of R922.4 million), while headline earnings per share lowered to 37.9 cents per share (2018: 96.8 cents per share).

Dividend
The directors have declared a final gross cash dividend (number 89) of 10.0 cents (8.0 cents net of dividend withholding tax), bringing the total dividend declared for the year ended June 2019 to 25.0 cents (2018: 40.0 cents).

Company prospects
Groceries will continue to focus on strong innovation, brand investment and efficiencies to drive profitability, although further share gains in key categories will be challenging in the highly competitive markets. Millbake is expecting further traction from its cost saving initiatives and ongoing investment in its brands.

Sugar expects to remain under significant pressure and urgent interventions are required at an industry level in order to ensure the future viability of the local industry. Local market sugar demand is expected to remain constrained and the balance of production not sold locally will continue to be exported at depressed global sugar prices. Whilst these factors are largely out of our control, we are placing significant focus on cost reduction and optimisation initiatives across the operations and we will continue to investigate viable diversification opportunities for our products in order to restore the Sugar business unit to profitability.

Chicken will focus on engagement with industry and government in order to establish a level playing field required for local producers to be able to compete with the significant volumes of dumped imports that enter the local market. The recent application to increase the tariff on imports of boneless cuts and bone-in portions from non-European Union countries to the maximum permitted by the World Trade Organisation of 82% has been delayed. Whilst the outcomes of these applications are still unknown, we will continue our focus on the business drivers within our control.

The Logistics division is well positioned to offer customers a multi-temperature route-to-market supply chain solution. The new business won during the period under review bodes well for the next year and the focus will be on bedding down these opportunities and improving efficiencies.

We remain comfortable with our low gearing profile in a distressed economy and believe that we are well placed to consider strategic opportunities that might be forthcoming in the South African market and remain well-positioned to capitalise on any improvements in the domestic economy.