Consumer goods and milling giant RCL Foods expects a significant decline in earnings for the year ended June 2026, weighed down by weak performances in its sugar, pet food and grocery businesses.
The company, which owns well-known brands including Selati Sugar, Yum Yum peanut butter, Sunbake bread, Bobtail and Catmor, warned shareholders that headline earnings per share (HEPS) are expected to fall by at least 35%, from 156.3 cents to between 101.6 cents and 109.4 cents.
Earnings per share (EPS) are forecast to decline even further, dropping by at least 55% to between 81 cents and 90.1 cents compared with the previous financial year.
The figures relate to the remaining RCL Foods business following the unbundling of Rainbow and the disposal of its Vector logistics segment.
Sunshine impairment weighs on earnings
A major contributor to the earnings decline is an impairment of goodwill and brands within the Sunshine cash-generating unit, which the company said had a 20.3 cents per share impact on EPS.
“The expected difference in HEPS and EPS in the current period relates largely to the impairment of goodwill and brands in the Sunshine cash-generating unit,” RCL Foods said.
The impairment was triggered by weaker profitability after the business struggled to recover sales volumes following labour disruptions at its Durban factory in December 2024.
Sugar industry pressures deepen financial pain
The group also reported weaker results from its sugar operations and Royal Eswatini Sugar (RES), leading underlying HEPS to decline to between 102.3 cents and 109.6 cents, down from 146.1 cents in the previous year.
RCL Foods said the sugar business was squeezed by rising input costs and the continued absence of effective tariff protection against imported sugar.
According to the company, large volumes of imported sugar flooded the local market, reducing domestic sales and forcing producers to export a larger share of production at lower prices.
“Sugar reported a significantly lower result due to high volumes of deep-sea imports, enabled by the absence of effective tariff protection,” the company said.
Industry-wide local sales volumes fell 10.3%, while export volumes rose 48.3% during the year.
Tariff dispute remains a concern
The company renewed its call for a suitable tariff framework to support the sustainability of the local sugar industry, noting that matters involving the International Trade Administration Commission (ITAC) remain unresolved.
RCL Foods said export sugar sales generated roughly R7,000 less per tonne than domestic sales during the year, making export pricing approximately 51.9% lower than local market pricing.
As a result, increased export volumes had a substantial negative impact on profitability.
Pet food recall disrupts operations
The group’s pet food division also came under pressure after a nationwide recall of selected dry pet food products in March due to Salmonella contamination risks.
The recall resulted in stock write-offs during the second half of the financial year and disrupted production and supply chains.
The company said supply constraints prevented it from fully meeting customer demand, resulting in a 20.5% decline in sales volumes.
Culinary and baking divisions show resilience
Despite challenges in several business units, RCL Foods reported stronger performances in its Culinary and Baking divisions.
The company said both segments benefited from Continuous Improvement and Net Revenue Management initiatives, helping offset volume pressures across most product categories.
“Both Culinary and Baking delivered good performances aided by Continuous Improvement and Net Revenue Management initiatives, despite volume pressure being experienced across most of their product categories,” the group said.
While RCL Foods continues to face significant headwinds in sugar and pet food, management believes operational efficiencies and stronger performances in other divisions will help cushion some of the impact as it navigates a challenging trading environment.
- RCL Foods expects headline earnings per share (HEPS) to fall by at least 35% to between 101.6 cents and 109.4 cents for the year ended June 2026.
- Earnings per share (EPS) are forecast to decline by at least 55% to between 81 cents and 90.1 cents compared with the previous financial year.
- An impairment of goodwill and brands within the Sunshine cash-generating unit contributed a 20.3 cents per share impact on EPS.
- The sugar business suffered due to high volumes of deep-sea imports and lack of effective tariff protection, causing underlying HEPS to drop to between 102.3 cents and 109.6 cents.
- A nationwide recall of dry pet food products in March led to stock write-offs and a 20.5% decline in pet food sales volumes.
