RCL Foods’ share price shot up 12% on Friday after it forecast a 31.2% to 38.6% increase in headline earnings per share for the six months to December 31.
Headline earnings per share (HEPS) from total operations for the group with well-known South African brands such as Ouma, Yum Yum, Selati and Nola were expected to be between 106 cents and 112 cents when compared to the reported HEPS of 80.8 cents from total operations, according to a trading statement by the group on Friday.
The strong results follow an equally strong financial year to end-June 2024, where underlying HEPS increased by more than 55%.
The share price traded at R10.19 on the JSE Friday afternoon, a price that was little changed over 12 months from 9.30 a year before.
Earnings per share (EPS) was expected to be between 131 cents (9.3%) and 138 cents (15.2%), when compared to the reported EPS from total operations of 119.8 cents for the comparative period.
The expected difference between EPS and HEPS is largely due to, among other items, the current period EPS including the non-cash gain realised on accounting for the unbundling of Rainbow, and the comparative period EPS including the gain on disposal of Vector Logistics.
In the current period, continuing operations relate to the remaining RCL Foods business, comprising the Groceries, Baking, Sugar and Group segments, post the unbundling of Rainbow on July 1, 2024, and disposal of Vector Logistics in the 2024 financial year.
The discontinued operation relates to the non-cash gain on accounting for the unbundling of Rainbow.
RCL expected HEPS from continuing operations to be between 106 cents (34.5%) and 112 cents (42.1%) when compared to a restated HEPS of 78.8 cents from continuing operations for the comparative period.
The improved headline earnings was largely due to gains in Groceries and Baking, and a partial recovery of the additional levy raised by the South African Sugar Association (SASA) in the 2023 financial year, on the Sugar business unit, as a result of Tongaat Hulett and Gledhow suspending payment of their industry obligations.
Volumes remained under pressure in most of the Groceries and Baking categories, but a focus on improvement and revenue management initiatives, optimising sales mix, lower input costs and the suspension of load shedding drove an improved result.
The Sugar segment continued to perform well after consecutive years of record performance off a high base, aided by operational improvements and a reduced industry exposure to lower margin raw exports.
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