RCL FOODS LIMITED - Business update and trading statement six months ended 31 December 2016

Business update and trading statement – six months ended 31 December 2016

RCL FOODS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1966/004972/06)
ISIN: ZAE000179438
Share Code: RCL
(“RCL FOODS" or “the Group”)

BUSINESS UPDATE AND TRADING STATEMENT – SIX MONTHS ENDED 31
DECEMBER 2016

BUSINESS UPDATE

RCL FOODS’ financial results for the six months ended 31 December
2016 will be materially impacted by the severe challenges faced by
the local chicken industry due to dumped imports and high feed
input   costs.  Excluding   RCL  FOODS’   Chicken  business   unit
performance, the balance of the Group will show trading profit
growth over the comparable period. The Sugar business unit has
shown improvement on the back of the higher industry pricing and
better channel mix. The turnaround within the Millbake business
unit has progressed well with the Gauteng bakeries returning to
profitability. Certain key brands within the Groceries business
unit have continued to grow volumes in a competitive market
environment.

RCL FOODS released a SENS (“Stock Exchange News Service”)
announcement on 27 September 2016 announcing its intention to
downsize its Chicken business unit to restore its profitability by
limiting production of consequential commodity products but
continuing to grow the demand-driven portfolio, largely comprising
the foodservice market. The Chicken business unit has initiated a
programme to reduce its Hammarsdale operations to a single shift,
thereby eliminating a portion of loss making IQF (Individually
Quick Frozen) product. Before consideration of the once off costs
referred to below, the Chicken business unit is expected to record
a loss for the first six months of the financial year.

TRADING STATEMENT

Shareholders are advised that RCL FOODS expects that its headline
earnings per share (“HEPS”) for the six months ended 31 December
2016 is expected to be between 40.0 cents (-54.1%) and 55.0 cents
(-36.9%) when compared to reported HEPS of 87.2 cents for the
corresponding six months ended 31 December 2015.

Earnings per share (“EPS”) for the six months ended 31 December
2016 is expected to be between 30.0 cents (-65.3%)and 45.0 cents
(-48.0%) when compared to reported EPS of 86.5 cents for the
corresponding six months ended 31 December 2015.

The interim financial results for the six months ended 31 December
2016 have been impacted by three material abnormal items, namely:

- An after-tax impairment of R102.7 million (excluded from
  headline earnings) for redundant plant and equipment related
  to the decision to reduce commodity chicken volumes. The
  impact on EPS is a negative 11.9 cents.

- The recognition of a R37.4 million after-tax provision for
  restructuring costs and fair value adjustments on biological
  assets, also associated with the decision to reduce chicken
  volumes. The impact on HEPS and EPS is a negative 4.3 cents.

- A foreign exchange loss of R27.9 million (nil tax impact), as
  a result of Rand:Dollar appreciation, relating to the
  settlement of the Zam Chick and Zamhatch options. The impact
  on HEPS and EPS is a negative 3.2 cents.

As previously reported, the results for the corresponding six
months ended 31 December 2015 were materially impacted by the
release of a R163.3 million provision for uncertain taxation
disputes raised as part of the Foodcorp acquisition. The release
had no cashflow impact. The impact on HEPS and EPS in the 31
December 2015 results was a positive 18.9 cents.

The results for the six months ended 31 December 2016 include a
negative after-tax IAS39 period on period movement of R56.4
million (HEPS and EPS impact of 6.5 cents) relating to the Group’s
raw material procurement strategy. This impact is largely
attributable to the strengthening of the rand exchange rate.

The Group’s interim financial results for the period ended 31
December 2016 are expected to be released on SENS on 23 February
2017.

The financial information on which this trading statement is based
has not been reviewed and reported on by the Group’s external
auditors.

Durban
31 January 2017


Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)

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