IM last commented on RCL Foods in March 2025. It was then priced at R10 and had reported a syrupy sweet set of interim results; IM optimistically believed the sugar rush might continue. For a while, it did. RCL ran up 13% to R11.29 … then it all turned sour.
A global glut of sugar caused prices to collapse because of a flood of imports into South Africa, where the government’s sugar tariff mechanism systematically failed to support local producers. This led RCL, which owns the best-selling Selati brand, to report slumping interim results to December 2025.
Revenue for the six months slipped 1.9% to R13.3bn and operating profit plummeted by a third to R828m. From a comparative period, when sugar was the largest contributor to revenue and profit, most of RCL’s profit drop was attributed to a 49% slide in the Selati sugar division as margins halved. Declining world prices and a strong rand meant that local volumes were displaced by imports.
The other two divisions didn’t cover themselves in glory either. In a challenging consumer environment, groceries and baking eked out modest increases in revenue — but both units experienced slight margin erosion and thus profit dips. In the groceries section profit fell 5% to R365m, while in baking, pies performed well, but a highly competitive bread market meant a 4% drop in profit to R402m.
A standout segment was pet food, where volumes grew. Bobtail is an example of one of RCL’s power brands in this niche. For many companies the pet segment has become one of the few growth touchpoints, as consumers will happily spend to keep Fluffy happy.
The Pieman’s business sells more than R1bn of product and had volume growth of 3% as consumers look for value meal options. Stronger growth might have been registered but for rising beef prices driven by foot-and-mouth disease, which pushed costs higher.
Group headline earnings for the six months fell 30.6% to 75.9c per share, and a more restrained 15c per share interim dividend was declared. RCL has been bumping along new 52-week lows despite a cheap-as-chips sector multiple of 5.7. Any investor looking at a historical share chart of the company would see a near 15-year sideways price trend.
There has been much speculation that Remgro at some stage would make an offer for minorities and sort out RCL behind the Stellenbosch veil
Management has cleaned up the company over the past few years.
Noncore and cyclical assets have been sold. Vector Logistics was sold in August 2023 for R1.25bn and the earnings-volatile Rainbow Chicken business flew the coop in June 2024 to a separate JSE listing. Investors have been wanting the sugar asset to be sold or spun off, but management, on a granular level, seems to like the business despite the volatility. IM cannot sugarcoat the reality. Who would wish to buy such an asset or even invest in a separately listed entity?
Ironically, cyclical food assets such as poultry and sugar do have moments of plenty.
Rainbow, as a separate entity, had an indifferent JSE listing with price drift. However, as poultry sector fundamentals shifted in its favour into the final quarter of 2025, with lower soft commodity input costs, Rainbow’s profits have flown higher. Its recent operating profit was a succulent 108% higher with a gravy boat of cash generation.
For years, RCL has been the cheapest rated listed food producer. This is due mainly to its historic mix of operational assets that never seem to fire all at the same time. If it wasn’t chicken delivering poor results, it was sugar.
As a highly illiquid counter, with investment counter Remgro controlling 80% of the company’s issued scrip, tradability is often thin. There has been much speculation that Remgro at some stage would make an offer for minorities and sort out RCL behind the Stellenbosch veil.
Another permutation is the merger of RCL with Remgro-owned food fats and oils giant Siqalo Foods, which would give RCL’s R5.5bn revenue groceries business a shot in the arm. Remgro has recently been hoarding cash, so long-suffering RCL shareholders can only hope. IM has even heard in the shopping aisles that an acquisitive rival cast a slide rule over RCL but then went shopping elsewhere.
At 897c with a tough second half expected due to the woes of Selati and only a modest uptick in other divisions, RCL does look cheap. It’s a value play; it has been for 20 years. But here we are, still bumping along at historic lows.
For investors with heaps of patience, RCL may be one to tuck away. However, IM prefers other sector growth champions, notably Premier Group.
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