RCL foods has predicted its headline earnings per share to be at least 35.6 cents lower for the year to June 2023 than the 118.6 cents a year before, with the uncertainty in the local sugar industry mainly to blame.
RCL Foods said in a trading statement yesterday that headline earnings per share were expected to be at least 30% lower, due to a special levy raised by the South African Sugar Association (SASA) on its sugar business unit, the significant impact of load shedding across all operations, and unrecovered feed costs by Rainbow.
The poultry and sugar group expects earning per share to be at least 34.2 cents lower than in the comparative period reported EPS of 114.0 cents.
The group said the South African sugar industry was in a state of significant uncertainty since the commencement of business rescue proceedings by Tongaat Hulett Sugar and the Gledhow Sugar Company.
“Pre-commencement levies and redistribution payments owed to SASA have not been paid and this was aggravated by the decision of the appointed business rescue practitioners of Tongaat Hulett Sugar to suspend the payment of their statutory industry obligations as of March 31, 2023,” it said.
RCL said as a consequence, the remaining industry participants have had to bear additional costs in the form of a special levy imposed by SASA in terms of the Sugar Act 9 of 1978 and Industry Agreement in order to cover the resulting shortfall.
“The net impact on RCL FOODS of special levies raised to date is R234 million. Any recovery of unpaid levies and redistribution payments from Tongaat Hulett Sugar and Gledhow Sugar Company remains a material unknown at present.
“Litigation has commenced in relation to the lawfulness of the decision by the appointed business rescue practitioners of Tongaat Hulett Sugar to suspend compliance with its statutory obligations,” it said.
RCL Foods in March took the Tongaat Hulett business rescue practitioners before the Sugar Industry Appeals Tribunal due to the refiner’s failure to pay outstanding levies to the SA Sugar Association.
In April, SA Canegrowers chairperson Andrew Russell said Tongaat Hulett’s failure to pay more than R900m due to the SA Sugar Association at the end of March, and a further default by the Gledhow mill, which was also in business rescue, had resulted in an 8% drop in the final RV price, the price that growers receive for the cane processed, for the 2022/2023 season.
He said these defaults, which in total would cost the industry R1.5 billion, of which R1bn was deducted from the growers’ proceeds, the RV price.
Tongaat Hulett was placed into voluntary business rescue as the company’s debt which was estimated to be more than R5bn was far more than the value of its assets. The company encountered problems following fraudulent activities, discovered in 2018, showing a R12bn shortfall in the accounts.
Meanwhile, RCL said on March 29, 2023, that an agreement to dispose of Vector Logistics had been concluded.
“The transaction is subject to fulfilment of conditions precedent, some of which are still in progress. As a result, Vector Logistics will be reported as an asset held for sale in the annual financial statements,” it said.
RCL Foods’ tiered portfolio will be critical in providing affordable nutrition as part of its Value-Added growth strategy, it said.
RCL Foods’ Value-added Business comprises the groceries, baking and sugar business units
Part of the group strategy of diversification includes RCL’s acquisition of Sunshine Bakery Holdings, finalised in February 2023, effective March 1, aimed to expand the business unit’s reach into the KwaZulu-Natal region.
BUSINESS REPORT