RCL FOODS LIMITED - Trading statement six months ended December 2017

Trading statement – six months ended December 2017

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”)

TRADING STATEMENT – SIX MONTHS ENDED DECEMBER 2017

Shareholders are advised that RCL FOODS expects that its headline
earnings per share (“HEPS”) for the six months ended December 2017
is expected to be between 69.5 cents (+46.0%) and 79.0 cents
(+66.0%) when compared to the reported HEPS of 47.6 cents for the
six months ended December 2016 (“corresponding period”).

Earnings per share (“EPS”) for the six months ended December 2017
is expected to be between 72.0 cents (+93.5%) and 79.0 cents
(+112.4%) when compared to the reported EPS of 37.2 cents for the
corresponding period.

The corresponding period’s financial results were impacted by the
material once-off items listed below, which were detailed in the
December 2016 results annoucement:

  •   An after-tax impairment of R102.7 million (excluded from
      headline earnings) relating to redundant plant and equipment
      identified following the decision to reduce commodity chicken
      volumes. The impact on EPS was 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 was a negative 4.3 cents.

  •   A foreign exchange loss of R27.9 million (nil tax impact),
      relating to the settlement of the Zam Chick and Zamhatch
      options. The impact on HEPS and EPS was a negative 3.2 cents.

Excluding the above once-off items, HEPS for the six months ended
December 2017 is expected to be between 69.5 cents (+26.1%) and
79.0 cents (+43.4%) when compared to the normalised HEPS of 55.1
cents for the corresponding period. Similarly, EPS for the six
months ended December 2017 is expected to be between 72.0 cents
(+27.2%) and 79.0 cents (+39.6%) when compared to the normalised
EPS of 56.6 cents for the corresponding period.

The improvement in the underlying results over the corresponding
period is mainly attributable to the Chicken business unit.
Chicken benefitted from substantially lower feed input costs,
higher IQF prices, and the positive impact of their revised
business model implemented in the second half of the prior
financial year, which focused on limiting the production of
consequential commodity products.
The Sugar business unit’s result is materially down on the
corresponding period, stemming from the negative impact that sugar
imports have had on local market sales volumes.

Within the Groceries portfolio, margin and volume gains in Grocery
and Pies offset volume pressure in the Speciality and Beverages
business units. Lower commodity input prices assisted margins and
drove an improved result for Animal Feed. Milling has made
progress in regaining lost volumes, whilst labour issues disrupted
progress in Baking.

The Logistics division’s results are down on the corresponding
period as a result of the reduced loads from the Chicken business
unit following the implementation of their revised business model,
however the implementation of various cost saving initatives have
partially mitigated this impact.

The Group’s financial results for the six months ended December
2017 are expected to be released on SENS on 26 February 2018.

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

Durban
12 February 2018


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

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