Although challenging economic conditions have remained a feature throughout the year, RCL FOODS has delivered a pleasing operating and fi nancial performance for the 2015 fi nancial year. Beyond delivering solid results, the company’s recent acquisitions and strategic restructuring initiatives have led to a stronger and more diversifi ed business that is geared for growth. This is complemented by a culture of high performance that is steadily being entrenched.

A defining change has been the strategy of conducting business with a “one company” approach. The Group previously operated its subsidiary entities as Foodcorp Proprietary Limited (“Foodcorp”), Rainbow Farms Proprietary Limited (“Rainbow”), TSB Sugar RSA Proprietary Limited (“TSB”) and Vector Logistics Proprietary Limited (“Vector”). These have now been structured into the logical business divisions of “Consumer” (which includes Rainbow and Foodcorp’s Grocery, Beverage, Pie and Speciality divisions) and “Sugar& Milling” (which includes TSB, Rainbow’s Feed division Epol and Foodcorp’s Milling and Baking divisions). Vector continues to operate as a stand-alone business, ultimately responsible for all of the Group’s route-to-market activities.


RCL FOODS’ revenue for the 12 months to June 2015 increased by 20,1% to R23,4 billion, largely due to the inclusion of a full 12 months of TSB. RCL FOODS’ EBITDA increased by 98,2% from R1 122,2 million to R2 224,0 million, with the associated margin increasing from 5,8% to 9,5%.

It is pleasing that, despite the challenges in many of the markets in which we are active, operating costs have been well maintained. This is highly commendable considering the strategic realignment and investment that has been a feature of the year, as well as a higher marketing spend in some areas to either retain, or improve, the strong market positions.

RCL FOODS achieved headline earnings of R964,5 million and headline earnings per share of 112,2 cents. This is an increase of 150,5% and 148,8% respectively compared to the 2014 pro forma results.

RCL FOODS successfully concluded various corporate transactions during the 2014 financial year and, due to the material impact of these activities, the Group has again published pro forma results as an additional comparative for the previous financial year. This, we believe, will provide shareholders with a better understanding of the underlying operational performance of the Group.

In November 2014, we started a process of replacing a bridging loan facility with a more appropriate debt structure. The R4,5 billion short-term loan facility was replaced by a R3,35 billion longer term debt package in February 2015. The pay down of R1,15 billion was funded by the proceeds from the Fishing division sale and cash from the rights issue in 2013. This initiative creates an even stronger foundation for growth as it provides more certainty for the Group’s future capital structure.

For more details regarding our financial performance, please refer to the CFO report here.


We remain cognisant of the fact that the South African economy’s underperformance is expected to continue in the foreseeable future, with anticipated labour, power and other disruptions supporting the possibility of slower economic growth in local markets.

South Africa’s weak economic outlook and softer currency, as well as a consumer inflation forecast above the government’s publicly-stated targets, will in all probability hamper the Group’s ability to achieve its near-term growth trajectory. As a Board we are, however, comfortable that the operational improvements implemented across the different businesses will contribute positively and that the strategic changes which have been introduced are now firmly entrenched. As a result we will start seeing additional short-, medium- and long-term benefits for all stakeholders.

Over the last year, there has been some improvement in the markets served by the Group’s chicken and sugar businesses, and the reductions in the fuel price have brought welcome relief to consumers in the short term.

The South African government recently reached an agreement with the authorities in the United States to renew the African Growth Opportunity Act (AGOA), which means that the motor and other industries (but not the poultry industry) will continue to benefit from duty-free access when selling products into the United States. Unfortunately, this renewal and the benefit to these industries comes at the expense of the South African poultry industry. The new agreement allows for 65 000 tons per year of leg quarters to be imported into South Africa, largely duty free. These products will still be subjected to the normal tariff implemented by ITAC last year. The South African poultry industry has an agreement from the Department of Trade and Industry and the Department of Agriculture, Forestry and Fisheries, to consider initiatives to offset the negative impact of these additional imports, but these remain under discussion and will not be resolved in the short term.

While the industry does not oppose imports into South Africa, we are certainly against the practice of “dumping” poultry products. It has always been our view that a quota is very necessary to ensure a viable industry, the protection of jobs and the creation of additional smaller suppliers throughout the value chain.


The Board of Directors remains firm in its belief that sound governance practices are an essential foundation for the longterm success of the Group. It is only by ensuring integrity across the entire Group and upholding the highest standards of corporate governance that we will ensure successful delivery of the Group’s strategy. As a Board, we ultimately accept responsibility for the Group’s performance, appreciating that strategy, risk, performance and sustainability are inseparable.

The Group accepts and adheres to the King III governance requirements and have ensured that these are comprehensively implemented as a fundamental part of each of the strategic change initiatives over the past year.

The Board and individual directors of RCL FOODS, who collectively possess the required skills, experience and diversity to carry out Group responsibilities, strive to ensure that all Group businesses are managed in an efficient, accountable, responsible and ethical manner.

For more details regarding our governance processes, please refer to the Governance report on our website


RCL FOODS consistently aims to operate in a manner that represents a platform for responsible investment. This is achieved by integrating sustainable development considerations into the decision-making process. The result creates an appropriate balance between the Group’s requirements to perform financially, to strive towards world-class standards in environmental management, and to ensure a broader social benefit.

External threats continue to affect the Group’s businesses – climate change imperatives have moved to the forefront of the decision-making processes, whilst energy and water usage has been at a premium during recent times. Throughout the Group, we aim to adopt strong and sustainable business practices whilst seeking competitive advantage and improved cost efficiency. We are in continual discussion with the relevant authorities to find equitable ways to work together, such as agreeing to power usage schedules, in order to ensure solutions for the country and our businesses.

For more details regarding our sustainability initiatives, please refer to the sustainability report on our website


The focus on the development of talent over the last year is starting to produce gratifying results. Various initiatives are under way to ensure that RCL FOODS’ people are equipped with the relevant skills as we continue advancing our growth strategy and strategic realignment. The Group reorganisation has necessitated various senior appointments which have pleasingly been met from within the Group over recent times, serving as a sure indication that RCL FOODS has a deep talent pool to draw from. The focus now is to ensure that workable succession plans are firmly in place and that management’s remuneration continues to be based on performance against targets (both financial and operational) and linked to longer-term strategic objectives.


The directors have resolved to declare a final gross cash dividend of 22,0 cents per share for the period ended 30 June 2015 (2014: 20,0 cents). An interim dividend of 15,0 cents was declared and paid during the financial year. It is the Board’s intention to continue paying dividends, subject to the Group’s underlying profit delivery.


The burden of a constrained market, together with the expectation of rising interest rates, labour demands and continuing high unemployment, is expected to hamper any sustainable improvement in consumer spending. These issues will have an impact across the segments in which the Group operates.

The Consumer division’s new management structure and focused investment behind its brands is expected to yield positive fi nancial results in 2016. The poultry industry is still facing uncertainty following the recent decision with respect to duty-free USA imports, while the injection cap issue remains unresolved. Improvements from the new chicken business model are expected to moderate in the new fi nancial year off a substantially higher base.

The Sugar & Milling division’s use of irrigation will largely shield it from the current drought conditions experienced by the KwaZulu-Natal sugar producers, however, the short-term outlook for global sugar pricing is negative.

Vector expects to commission new capacity in the latter half of the year, allowing the take-on of potential new customers. The continuing good performance of foodservice customers is expected to help off set negative economic factors.

RCL FOODS expects that cash fl ows in the business will remain robust against the backdrop of a signifi cant capital expenditure investment programme. It will allow RCL FOODS to continue plans to explore opportunities in strategic growth markets in the food sector in South Africa and sub-Saharan Africa in line with its long-term aspirations.


On behalf of the Board, I express my deep gratitude to the management team, as well as all employees for the tremendous commitment displayed over the year. We are very well positioned to continue progressing our main priorities and targets, and in so doing successfully delivering the Group’s overall strategic ambition, whilst being ever mindful of our responsibility to all stakeholders. RCL FOODS, and its people, remain committed to ensuring a strong and sustainable future, for today and tomorrow. Thank you for your ongoing support.

JJ Durand
Non-executive Chairman