RCL Foods, after successfully separating from Rainbow this year and Vector Logistics in 2023, will focus on scaling up its remaining businesses, CEO Paul Cruikshank said in the annual report released on Friday.
The group’s “strategic clarity and cash generative operations” places it in a strong position to consider potential bolt-on acquisitions, and a number of opportunities had been investigated in the past year, he said.
“Our central business services platform remains a key strategic capability in this regard,” he said. Group brands include Yum Yum, Ouma, Epol and Canine Cuisine.
Organic growth via expansion into adjacent categories and new geographies would also be pursued, with the recently-integrated KwaZulu-Natal-based Sunshine Bakery business being an example.
He said the economic environment was expected to remain challenging in the new financial year, with consumers likely to remain under pressure amid sustained high interest rates, household debt and unemployment, all of which could impact further on local sales volumes and price realisations.
On a macro level, key downside risks included volatility in the rand/dollar exchange rate and high commodity input costs.
“We will continue to prioritise affordability while safeguarding the sustainability of our business. A key priority for the coming year will be to unlock savings to manage the temporary overheads, synergies from the Vector Logistics and Rainbow separations, and to maintain a strong cash focus to enable the group to invest in growth opportunities.”
He said that while market prices remained elevated, some recent recovery in market volumes was encouraging.
“We will continue to execute our front-end recovery programmes in Grocery (Pet Food) and Baking (Bread, Buns & Rolls and Pies), while shifting gears to drive strategic growth in Speciality Pet and Exports,” he said.
Improved results were anticipated from the Sugar business. Better agricultural yields and further cost saving initiatives would support its results into the future, said Cruickshank.
“World market prices are, however, expected to come under pressure in the forthcoming year. There remains significant uncertainty around the future of the sugar industry in South Africa and we will continue to support the South African Sugar Association and government in endeavours to ensure the industry’s long-term sustainability,” he said.
In the past year, the Sugar business unit’s strong underlying performance was supported by higher local and export prices, an improved agricultural performance and “an outstanding Animal Feed result”. This offset of lower sales volumes was relative to the 2023 financial year, when the market bought in ahead of the local sugar price increase.
In 2024, the group produced 85 million jars of mayonnaise, 26 million jars of peanut butter, 75 000 tons of pet food, 107 million pies, 43 million litres of beverages, 350 000 tons of flour, 282 million units of bread, buns and rolls, 30 million units of Speciality products, 574 503 tons of sugar, 356 000 tons of chicken products and 1.25 million tons of animal feed.
The accounting for the disposal of Rainbow would occur in the 2025 financial year. Prior to unbundling, Rainbow, RCL recapitalised the Rainbow balance sheet, with R1.4bn in interest-bearing debt owing by Rainbow to the balance of the group and providing a further R300 million in equity funding.
BUSINESS REPORT
