Investment reviews
  • Unilever South Africa Holdings PROPRIETARY Limited (Unilever South Africa)

    Unilever South Africa has a December year-end, but its results for the twelve months ended 30 June 2014 have been included in Remgro’s results for the year under review. Unilever South Africa’s contribution to Remgro’s headline earnings for the year under review decreased to R347 million (2013: R426 million), as turnover growth was offset by an increase in supply chain costs, as well as brand and marketing investments and restructuring costs in order to drive cost efficiencies.

    Unilever South Africa’s net profit for the twelve months ended 30 June 2014 decreased to R1 764 million (2013: R1 784 million).

    The net profit for the period under review includes a profit on disposal of warehouses of R427 million, while the profit for the comparative period includes a profit on disposal of the Mrs Ball’s brand amounting to R156 million.

  • Distell Group Limited (Distell)

    Distell has a June year-end and therefore its results for the twelve months ended 30 June 2014 have been included in Remgro’s results for the year under review. Distell’s contribution to Remgro’s headline earnings for the year under review, which includes Remgro’s indirect interest in Distell held through Capevin Holdings Limited, increased by 38% to R495 million (2013: R360 million).

    Distell reported for its year ended 30 June 2014 that turn­over grew by 13% to R17 740 million (2013: R15 726 million) on a sales volume increase of 3.1%. Sales volume in the South African market increased by 2.6%, while revenue increased by 5.2%. International sales volumes and revenue, including Africa, increased by 4.5% and 34.2% respectively, benefiting from a weaker rand. Sub-Saharan African markets, excluding South Africa, contributed 49.6% to international revenue and continued to deliver strong results as volumes grew across all categories.

    Distell’s headline earnings for its year ended 30 June 2014 increased by 40% to R1 514 million (2013: R1 078 million). The increase is mainly attributable to the accounting for a remeasurement of R159 million of the contingent purchase consideration payable on the acquisition of Burn Stewart Distillers Limited during the current year. Normalised headline earnings, which exclude the impact of the aforementioned once-off item during the current year, as well as abnormal excise duty and related interest provisions during the previous year, were slightly higher at R1 366 million (2013: R1 343 million).

    The benefits from improved operational efficiencies, the normalisation of certain raw material input costs and foreign currency conversion gains have partially offset higher excise duties and marketing expenses as the results for the period were supported by satisfactory overall revenue growth.


    RCL Foods acquired a controlling interest of 64.2% in New Foodcorp Holdings Proprietary Limited (Foodcorp) with effect from 1 May 2013 and acquired the remaining 35.8% minority interest in Foodcorp during the year under review. Due to the inclusion of two months of Foodcorp’s results during the previous year, as opposed to twelve months for the year under review, the operating results of RCL Foods are not directly comparable to those of the previous year. In addition to the above, RCL Foods has also completed various significant corporate transactions, which include the refinancing of Foodcorp’s foreign currency debt, acquisition of TSB Sugar and restructuring of its BEE interest during the year under review, further complicating the comparability of year-on-year earnings.

    For the year ended 30 June 2014, the headline earnings of RCL Foods amounted to a loss of R303 million (2013: earnings of R29 million). The results of RCL Foods have mainly been impacted by the following once-off items during the year under review:

    • Material foreign exchange losses on the early redemption of Foodcorp’s euro-denominated debt;
    • Non-recurring BEE costs relating to its BEE restructuring; and
    • Transaction costs relating to the various corporate actions.

    RCL Foods’ total revenue for the year under review increased by 95% to R19 720 million (2013: R10 109 million), with Foodcorp’s contribution to revenue amounting to R7 768 million (2013: R1 218 million for the two months since acquisition) and the revenue of the chicken business (Rainbow) increasing by 7% to R8 733 million (2013: R8 144 million). Foodcorp’s contribution to operating profit before depreciation and amortisation (EBITDA) amounted to R721 million (2013: R139 million for the two months since acquisition) while Rainbow and Vector, RCL Foods’ logistics operations, contributed R204 million (2013: R194 million) and R199 million (2013: R185 million) respectively. Despite the increase in EBITDA from Rainbow, overall profitability and margins in the poultry industry are still challenging and continues to be negatively impacted by high import volumes, constrained consumer spending and high feed costs. TSB Sugar’s EBITDA for the six months since acqui­sition by RCL Foods amounted to R147 million. This reflects strong operating cash generation by all business units.

    RCL Foods continues to explore food sector opportunities in strategic growth markets in South Africa and sub-Saharan Africa to build a diversified food business of scale with compelling brands that meet consumer needs.