RCL Foods has reported a sharp decline in earnings for the year ended June 2026, with weaker performances in its sugar and pet food businesses weighing on profitability, despite improved results in parts of its groceries and baking divisions.
The food producer said revenue from continuing operations fell 4.1% to R24.5-billion, while underlying earnings before interest, tax, depreciation and amortisation (EBITDA) declined 8.6% to R2.18-billion. Underlying headline earnings dropped 27.1% to R951.4-million and headline earnings per share fell 32.8% to 105.1 cents.
READ: RCL Foods earnings take a hit from sugar, pet food, Sunshine unit
The company, which produces a wide range of branded food and beverage products across South Africa, including Sunbake and Sunshine bread, Pieman’s pies, Selati sugar, Nola mayonnaise and spreads, Ouma rusks, Mageu Number 1, Catmor and Canine Cuisine pet food, as well as a variety of sauces, seasonings, dressings, baking products and animal feeds.
Sugar business under pressure
RCL Foods said its sugar division was severely affected by high volumes of imported sugar, which displaced local sales and forced more product into lower-priced export markets. The company blamed ineffective tariff protection for allowing deep-sea imports to flood the domestic market.
The situation was compounded by a decline in global sugar prices and a stronger rand, which reduced export revenue. Industry local-market sugar volumes fell 10.3%, while export volumes increased 48.3% during the year.
“Sugar was materially impacted by deep-sea imports, enabled by ineffective tariff protection, which displaced local-market sales into the lower-priced raw export market, while pet food was constrained by food-safety-related production disruptions, which constrained supply and our ability to meet demand in the second half of the financial year,” said the company in a statement.
“Due to the ineffective tariff, the sugar industry did not take any sales price increases in the local market during the current year, despite incurring inflationary input cost increases.”
The company said the gap between local and export pricing averaged about R7,000 per tonne, significantly impacting profitability. Despite these market pressures, it noted that operational performance across agriculture and manufacturing improved.
Pet food recall hits earnings
Within the groceries division, culinary and beverages delivered positive performances, helped by operational efficiencies, product mix improvements and volume growth. However, these gains were offset by challenges in the pet food business.
RCL Foods said the detection of Salmonella in some dry pet food products led to a nationwide recall, production disruptions and stock write-offs, which constrained supply and hurt earnings in the second half of the year.
READ: Mpumalanga sugar industry threatened by 400% surge in Brazilian imports
The company said restoring production, rebuilding customer confidence, and recovering market share would be key priorities in the coming financial year.
Baking division improves
The baking business delivered stronger results, driven by manufacturing efficiencies and lower overhead costs. Bread, buns, and rolls benefitted from continuous improvement initiatives and disciplined pricing, while Pieman’s improved profitability through savings and innovation despite higher fuel and meat costs.
However, milling faced pressure from lower volumes and plant reliability challenges. Speciality products also posted an improved performance through operational efficiencies and expansion into new categories.
RCL Foods also recognised a R206.1 million impairment in its Sunshine operations, which it said continues to struggle to recover volumes following labour disruptions at its Durban bakery in December 2024.
Outlook
Looking ahead, the company said it would continue focusing on continuous improvement, revenue management, and innovation across its operations. It expressed optimism that changes to the dollar-based reference price implemented in August 2026 would help ease sugar imports and improve the balance between domestic and export sales.
“Following the production disruptions experienced in pet food in the current year, our focus going forward will include executing the recovery plan and restoring customer confidence and market share. In sugar, an easing of deep-sea imports and an improved balance between local-market and exports sales is expected following revisions to the dollar-based reference price implemented in August 2026,” the company said in a statement.
The board declared a final dividend of 25 cents a share, payable on October 19.
- RCL Foods reported a 4.1% decrease in revenue to R24.5 billion and an 8.6% decline in underlying EBITDA to R2.18 billion for the year ended June 2026.
- Underlying headline earnings dropped 27.1% to R951.4 million, and headline earnings per share fell 32.8% to 105.1 cents.
- The sugar division faced pressure from high volumes of imported sugar, ineffective tariff protection, lower global sugar prices, and a stronger rand, leading to a 10.3% fall in local sales and a 48.3% increase in export volumes.
- The pet food business experienced Salmonella-related production disruptions and a nationwide recall, negatively impacting supply and earnings in the second half of the financial year.
- Despite challenges, the baking division showed improved performance from manufacturing efficiencies and lower overhead costs, while the board declared a final dividend of 25 cents per share payable on October 19.
