RCL FOODS is expecting a 30% drop in earnings per share driven by a special levy raised by the South African Sugar Association on the Group’s sugar business unit, the significant impact of loadshedding across all operations in the current period, and unrecovered feed costs in Rainbow, the company said in a trading statement issued yesterday.
RCL said that the South African sugar industry is in a state of significant uncertainty since the commencement of business rescue proceedings by Tongaat Hulett Sugar and Gledhow Sugar Company. Pre-commencement levies and redistribution payments owed to the South African Sugar Association (SASA) have not been paid and this was aggravated by the decision of the appointed business rescue practitioners of Tongaat Hulett Sugar to suspend payment of their statutory industry obligations as at March 31, 2023. 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 (pre-tax impact). 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 (BRPs) of Tongaat Hulett Sugar to suspend compliance with its statutory obligations. The BRPs have contended that the industry levies and obligations are contractual and not statutory and can, therefore, be lawfully suspended.
Vector Logistics
On March 29, 2023, RCL FOODS announced the conclusion of an agreement to dispose of Vector Logistics. The transaction is subject to fulfillment 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.
Trading
The company said that its headline earnings per share (HEPS) and earnings per share (EPS) for the current period (year ended June 2023) are expected to be at least 30% lower than the comparative period (year ended June 2022). The current period HEPS is expected to be at least 35.6 cents (30.0%) lower than the comparative period, with the reported HEPS of 118.6 cents and EPS is expected to be at least 34.2 cents (30.0%) lower than the comparative period reported EPS of 114.0 cents.
The Group’s financial results for the current period are expected to be released on September 4, 2023. A further trading statement will be released as soon as the Group has a reasonable degree of certainty as to the expected HEPS and EPS ranges for the current period, according to the trading statement.
