RCL Foods expects a significant decline in earnings for the year ended June 2026, driven primarily by weaker performance in its sugar and pet food businesses, as well as an impairment linked to its Sunshine cash-generating unit.
According to a trading statement, the food producer expects headline earnings per share (HEPS) from total operations to fall between 35% and 30%, to between 101.6 cents and 109.4 cents, compared with 156.3 cents in the previous financial year.
Earnings per share (EPS) from total operations are expected to decline between 50% and 55%, to between 81 cents and 90.1 cents, from 180.1 cents in the comparative period.
Underlying HEPS is expected to decline between 25% and 30%, to between 102.3 cents and 109.6 cents, from 146.1 cents.
Sugar market weighs on earnings
RCL Foods said the biggest pressure came from its sugar business and associate Royal Eswatini Sugar (RES).
High volumes of deep-sea sugar imports, combined with ineffective tariff protection, contributed to a 10.3% decline in local industry sugar volumes and pushed more production into the lower-priced export market, where industry volumes increased 48.3%.
International raw sugar prices also declined by an average of 22.6%, while a stronger rand reduced realised rand export prices.
RCL Foods said the gap between local and export prices averaged around R7,000 per tonne, with export prices approximately 51.9% below local prices. The company said the unresolved sugar tariff remains critical to the sustainability of the industry.
RES was similarly affected by market conditions, compounded by a delayed start to the crushing season following late summer rains.
Pet food volumes fall 20.5%
The group's pet food business was also affected by food-safety-related production disruptions during the year.
The disruptions constrained supply and the company's ability to meet demand, while contributing to higher stock write-offs in the second half of the financial year.
Pet food sales volumes fell 20.5% compared with the previous year.
By contrast, RCL Foods said its culinary and baking businesses delivered good performances, supported by continuous improvement and net revenue management initiatives despite volume pressure across several product categories.
Sunshine impairment adds to earnings decline
The difference between reported HEPS and EPS was also influenced by goodwill and brand impairment in the Sunshine cash-generating unit, which had a 20.3 cents-per-share impact.
RCL Foods said the impairment followed declining profitability as Sunshine struggled to recover volumes after labour disruption at its Durban factory in December 2024.
The company noted that the previous year's EPS was also boosted by once-off factors, including a profit on the disposal of discontinued operations and insurance proceeds.
RCL Foods is expected to release its full financial results for the year ended June 2026 on 31 August 2026.
