CONSUMER PRODUCTS

 

CONTRIBUTION TO HEADLINE EARNINGS 30 June 2020
R million
30 June 2019
R million
RCL Foods 92 254
Distell – entity contribution 165 459
IFRS 3 charge (47) (47)
Siqalo Foods – entity contribution 414 332
IFRS 3 charge (79) (80)
545 918

PROFILE: RCL Foods is a holding company with diversified interests that focuses on three segments: Consumer (Chicken, Grocery, Pies, Beverages and Speciality business units), Sugar & Milling (Sugar, Animal Feed and Millbake business units) and Logistics.

Corporate information
Market cap at 30 June 2020
R7 817 million
Listed on the JSE Limited 
Chief Executive Officer
M Dally
Remgro nominated directors
J J Durand, P R Louw,
H J Carse, P J Neethling (alternate)
Website
www.rclfoods.com
Financial Highlights
Year ended
30 June 2020 
R million 
Revenue 27 804 7.4
Operating loss (806) n/m
Headline earnings 114 (65.3)
* n/m – not meaningful.
Sustainability measureS
CSI/Training spend
R29 million
Number of employees
20 823
BBBEE status
Level 3
Environmental aspect
Scope 1 and 2 emissions
of 1 039 798 tonnes CO2e

RCL FOODS Limited (RCL FOODS)

For the year ended 30 June 2020, RCL Foods’ headline earnings decreased by 65.3% to R114 million (2019: R329 million). Remgro’s share of the headline earnings of RCL Foods amounted to R92 million (2019: R254 million) for the year under review.

The company’s headline earnings result was materially impacted by the Covid-19 pandemic and national lockdown in the last quarter of the current financial year, with the most significant impact of the pandemic on Chicken and Vector Logistics, largely due to the closing of quick service restaurants (QSR).

RCL Foods’ revenue for the year ended June 2020 increased 7.4% to R27.8 billion (2019: R25.9 billion). The increase was largely due to higher prices in Sugar and higher Vector revenue resulting from the take-on of Siqalo Foods in March 2019.

The restructuring into one Food Division, comprising the four logically grouped business units of Groceries, Baking, Chicken and Sugar, was implemented earlier this financial year, with a shift towards a value focus. Groceries delivered a strong performance, driven by volume growth, especially in Pet Food, Peanut Butter and Rusks. Revenue from Baking increased by 2.7% on the prior year, largely driven by higher volumes in bread, buns and rolls. Chicken revenue increased by 2.1% on the prior year driven by higher volumes. The volume growth was partially offset by lower pricing as a result of the national lockdown with QSR volumes being redirected to the Retail Wholesale channel at lower prices or being held in stock. Sugar has delivered a significant improvement in profitability, albeit off a low base, while its revenue increased by 15.3%, driven by higher sugar sales volumes, increased prices and improved mix.

The current financial period has been a watershed year for Vector Logistics. The successful take-on of Siqalo Foods in the first half of the year and the acquisition of Imperial Logistics’ cold chain business in the second half, were the main drivers of top line growth.

PROFILE: Distell produces and markets fine wines, spirits and flavoured alcoholic beverages in South Africa and internationally.

Corporate information
Market cap at 30 June 2020
R16 761 million
Listed on the JSE Limited
Chief Executive Officer
R M Rushton
Remgro nominated directors
J J Durand, P R Louw (alternate)
Website
www.distell.co.za
Financial Highlights
Year ended
30 June 2020
R million 
Revenue 22 370 (14.6)
Operating profit 981 (44.2)
Headline earnings 517 (63.9)
Sustainability measureS
CSI/Training spend
R25 million
Number of employees
4 845
BBBEE status
Level 4
Environmental aspect
Scope 1 and 2 emissions
of 130 299 tonnes CO2e

Distell Group HOLDINGS Limited (Distell)

Distell’s contribution to Remgro’s headline earnings for the year under review amounted to R165 million (2019: R459 million). Including an additional IFRS 3 charge accounted for at Remgro level, Distell contributed R117 million (2019: R412 million).

Distell’s reported headline earnings for its year ended 30 June 2020 decreased by 64.1% to R517 million (2019: R1 441 million).

The restrictions imposed on the sale of alcohol as a part of government’s strategy to curb the spread of the Covid-19 virus reduced the trading year by nearly 20%. As a result, the group lost approximately 100 million litres in sales volumes and R4.3 billion in revenue due to the lockdown restrictions that were imposed in various countries and, in particular, its largest market, South Africa. Revenue declined by 14.6% to R22.4 billion on 22.5% lower volumes. Revenue excluding excise duty decreased by 15.8%.

Key gin and vodka brands performed well in a competitive environment with spirits enjoying some growth after the first South African ban on liquor sales was lifted. The broader wine category was also impacted by restrictions although the category saw a resurgence in consumer purchases following the lifting of restrictions. Increased competition and discounting in a growing ready-to-drink (RTD) category continued. However, Savanna continued its strong momentum against competitors, validating Distell’s focus on building brand equity over aggressive price discounting. New innovations in Esprit and Savanna Non-Alcoholic recorded strong performances during the year. The group also generated a total of R25 million in revenue from the sales of ethanol and sanitiser in the reported period.

In African markets, outside South Africa, revenue declined by 3.0% on lower sales volumes, which were down by 14.7%, mainly as a result of a 19.1% decline in volumes in Botswana, Lesotho, Namibia and Eswatini. Volumes in international markets outside Africa declined by 13.1% and revenue by 8.8%, respectively.

PROFILE: Siqalo Foods manufactures spreads which it sells under market-leading trade marks.

Corporate information
Equity valuation at 30 June 2020
R6 145 million
Unlisted
Managing Director
A Mahoney
Remgro nominated directors
J J du Toit, M Rabie
Website
www.siqalofoods.com
Financial Highlights
Year ended
30 June 2020 
R million
Revenue 2 712 3.3
Operating profit 515 15.2
Headline earnings 414 24.7
Sustainability measureS
CSI/Training spend
R4 million
Number of employees
300
Environmental aspect
Scope 1 and 2 emissions
of 247 652 tonnes CO2e

Siqalo Foods Proprietary Limited (SIQALO FOODS)

Siqalo Foods manufactures spreads, which are sold under market-leading trade marks such as Rama, Flora, Stork and Rondo within the Southern African customs union territories.

Siqalo Foods’ contribution to Remgro’s headline earnings for the year under review amounted to R414 million (30 June 2019: R332 million), excluding additional IFRS 3 amortisation of R79 million (30 June 2019: R80 million). Siqalo Foods received an after tax finalisation amount of R31 million from Unilever. Excluding the finalisation amount Siqalo Foods’ contribution to headline earnings increased from R332 million to R383 million (or 15.4%). During a challenging, turbulent year impacted by the Covid-19 pandemic as well as the weak South African rand impacting on imported raw materials (resulting in a price increase taken in September 2019), Siqalo Foods experienced a 3.3% decline in volumes compared to the prior year. Good cost management enabled the business to increase its operational EBITDA by 13.7%. The business continues to deliver good results in line with prior years driven by its market leading brands. On 30 June 2020, Siqalo Foods had a combined 12-month moving average value market share of 70.2%. Siqalo Foods remains committed to grow its brands and volumes in 2021 while maintaining its profit margins during the subdued economic conditions.

Two contracts are in place with RCL Foods. Vector Logistics provides the distribution, sales and merchandising, while a management services contract governs certain services that RCL Foods Shared Services platform provide to Siqalo Foods on an arm’s length basis. The result is an innovative, alternative business model, leveraging the capabilities within the wider Remgro Group of companies.