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RCL FOODS LIMITED – Unaudited group financial results and cash dividend declaration for the six months ended 31 December 2016

SENS announcement for JSE listed company: RCL
                        

RCL 201702230072A
Unaudited group financial results and cash dividend declaration for the six months ended 31 December 2016

RCL FOODS LIMITED
(‘RCL FOODS’ OR ‘GROUP’)
UNAUDITED GROUP
FINANCIAL RESULTS
AND CASH DIVIDEND
DECLARATION

FOR THE SIX MONTHS ENDED
31 DECEMBER 2016

FINANCIAL
HIGHLIGHTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2016

REVENUE

R13,1 billion
up 1,6%

HEADLINE EARNINGS

R411,0 million
down 44,7%

INTERIM DIVIDEND PER SHARE

10,0 cents
down 33,3%

EBITDA

R900,4 million
down 21,9%

HEADLINE EARNINGS PER SHARE

47,6 cents
down 44,8%

CASH GENERATED BY OPERATIONS

R103,2 million
down 73,2%

KEY FEATURES
– Oversupplied retail chicken market largely due to dumped imports severely
impacts profitability

– Impairments and restructure costs in Chicken

– Sugar recovers well

– Millbake improves due to turnaround of the Gauteng bakeries

– Commodity input prices impact volumes and margins in Animal Feed and Milling

– Logistics delivers acceptable growth

– Certain key Groceries brands grow market share

ABRIDGED CONSOLIDATED UNAUDITED RESULTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2016

FINANCIAL HIGHLIGHTS Restated
Six months Six months
31 December 31 December %
2016 2015 change

Revenue (R billion) 13,1 12,9 1,6
EBITDA (R million) 900,4 1 152,2 (21,9)
Headline earnings (R million) 411,0 742,7 (44,7)
Headline earnings per share (cents) 47,6 86,2 (44,8)
Interim dividend per share (cents) 10,0 15,0 (33,3)
Cash generated by operations (R million) 103,2 385,2 (73,2)

INTRODUCTION
RCL FOODS’ EBITDA for the six months ended
31 December 2016 declined by 21,9% to R900,4 million
(H1 2016: R1 152,2 million), with the related margin
declining 2,0% to 6,9%.

The Group’s result was severely impacted by the
performance in the Chicken business unit with the
widely reported poultry industry issues having
decimated profits. RCL FOODS has initiated a number
of strategies to ensure that its remaining Chicken
operations will be more profitable and sustainable
going forward.

The Group’s pre-IAS 39 EBITDA, excluding the Chicken
business unit, is up 8,4% to R973,6 million at a margin
of 11,0% (H1 2016: R898,2 million at a margin of 10,3%)
bolstered largely by the profit recovery in Sugar and
good progress with the turnaround of the Gauteng
bakeries.

Material financial impacts over the current and prior
period include:
– R142,2 million impairment of plant and equipment
related to the decision to reduce commodity
chicken volumes;
– The recognition of a R51,9 million provision for
restructuring costs and fair value adjustments on
biological assets, also associated with the decision
to reduce chicken volumes;

– A foreign exchange loss of R27,9 million relating to
the settlement of the Zam Chick Limited
(‘Zam Chick’) and Zamhatch Limited (‘Zamhatch’)
options;

– A negative IAS 39 adjustment, relating to the
Group’s commodity raw material procurement
strategy, which has reduced EBITDA by
R35,3 million for the current period relative to
an increase in EBITDA of R43,1 million in the
comparable period. The R78,4 million negative
movement from the comparative period is mainly
due to the strengthening of the rand exchange rate;
and
– The prior period included the release of a
R163,3 million provision for uncertain taxation
disputes raised in terms of IFRS 3 (Business
Combinations) as part of the Foodcorp acquisition.
This matter was finalised with the South African
Revenue Service and consequently the income tax
expense for the six months ended 31 December 2015
was reduced by R163,3 million.

During this period, the most prominent impact of
the drought has been the sustained high price of
soft commodities including maize, wheat, soya and
sunflower. Some of the RCL FOODS product categories
have been successful in maintaining margins through
price increases and operational efficiencies, while
in other areas reduced demand from cash-strapped
consumers necessitated that price increases be
balanced against the protection of market share. It is
encouraging to note that rainfall in many of the affected
areas has started to alleviate the distress and it is
expected that commodity input prices will gradually
subside over the next period, supported by more
normalised rainfall patterns. As forecast, the drought
also led to reduced production volumes in the Sugar
operations. While these production volumes are only
expected to normalise in the next financial year, strong
sugar prices domestically and internationally, as well
as tight cost control and sales mix enhancements, have
translated into the Sugar business unit generating strong
revenue and profit growth.

STRATEGIC PROGRESS
RCL FOODS’ strategy remains focused on building
a food business of scale with a balanced portfolio of
products moving towards higher margin, added value
sectors of the market. Despite the significant challenges
brought about by the drought and the crisis in the
chicken industry, the Group has remained steadfast in its
focus on implementing its strategic imperatives.

RCL FOODS FINANCIAL REVIEW
Income statement
RCL FOODS’ revenue for the six months to
December 2016 increased by 1,6% to R13,1 billion
(H1 2016: R12,9 billion). EBITDA declined by 21,9% to
R900,4 million from R1 152,2 million, with the associated
margin decreasing to 6,9% from 8,9%.

The table below shows EBITDA from a statutory
perspective and adjusted for unrealised gains and
losses on financial instruments (pre-IAS 39) used in the
Group’s commodity raw material procurement strategy.
Reporting the financial effects of certain financial
instruments used in the procurement strategy in terms
of IAS 39 introduces volatility to the Group’s financial
results. For the period under review, the pre-taxation
impact on the Group’s results of these unrealised
positions is a negative impact of R35,3 million (H1 2016:
R43,1 million positive impact). The prior period positive
impact was largely due to the depreciation of the
Rand/Dollar exchange rate, with the current period
negative impact mainly due to adverse maize positions.

Restated
Six months Six months
31 December 31 December %
2016 2015 change

EBITDA (R million)
-Statutory 900,4 1 152,2 (21,9)
-Pre-IAS 39 935,7 1 109,1 (15,6)
-Pre-IAS 39
-excluding Chicken 973,6 898,2 8,4
EBITDA margin (%)
-Statutory 6,9 8,9 (2,0)
-Pre-IAS 39 7,2 8,6 (1,4)
-Pre-IAS 39
-excluding Chicken 11,0 10,3 0,7

The Consumer division’s EBITDA declined by 55,2%
to R224,9 million (H1 2016: R501,6 million). Excluding
Chicken, the remaining Groceries business units’ EBITDA
declined by 9,6% to R262,7 million at a margin of 9,2%
(H1 2016: 11,1%), largely due to challenges in the Speciality
and Beverages business units.

The Sugar & Milling division’s EBITDA increased by 20,7%
to R578,2 million (H1 2016: R479,3 million) at a margin
of 7,6% (H1 2016: 6,3%). This strong performance was
attributable to the Sugar business unit’s recovery and the
operational turnaround of the Gauteng bakeries within
the Millbake business unit.

The Logistics division’s EBITDA increased by 7,7% to
R145,2 million (H1 2016: R134,9 million) at a margin of
13,7% (H1 2016: 13,6%).

The Group’s effective tax rate for the period of 30,7%,
was largely impacted by the effect of the non-deductible
foreign exchange loss resulting from the settlement of
the Zam Chick and Zamhatch options.

Statement of financial position
The negligible increase in property, plant and equipment
is due to the R142,2 million chicken impairment offsetting
capital expenditure investments and depreciation
charges.

Intangible assets have declined from December 2015
due to the impairment loss of R642,8 million (goodwill
R377,4 million and trademarks R265,4 million) relating
to the Milling cash-generating unit in the Sugar & Milling
division processed at June 2016.

The decrease in investments in joint ventures from
December 2015 is mainly as a result of RCL FOODS
exercising its Zam Chick and Zamhatch put options in
March 2016. The exit from the Zambian operations was
finalised in September 2016, with RCL FOODS receiving
cash as settlement for its investment.

The increase in investment in associates is largely a result
of the equity accounted earnings of The Royal Swaziland
Sugar Corporation Limited (‘RSSC’).

Net working capital (excluding biological assets) has
increased by R383,2 million over the comparative period,
largely as a result of higher value stock balances on
hand in the Sugar business unit, where despite an overall
decrease of 10 094 tons on hand, a change in the stock
mix has resulted in increased stock values at
31 December 2016. The impact of the drought has
resulted in reduced cane volumes, which necessitated an
earlier start to the off-crop season and placed pressure
on the ability to meet the local market demand for
refined sugar. As a result, raw sugar was drawn from
existing stock balances and further processed, resulting
in an increase of 50 246 tons of the higher margin
refined sugar on hand at 31 December 2016, which is
expected to realise in the local market in H2 2017.

Cash flow and working capital
Net working capital movements increased by 31,9%.
This was mainly attributable to higher value inventory
balances on hand at 31 December 2016, which increased
by R416,1 million. An increase of R465,5 million in trade
and other receivables was offset by a R498,4 million
increase in trade and other payables. The large
fluctuations in trade receivables and payables were
due to the timing of receipts and payments over the
December calendar year-end period.

The cash outflow from investing activities was reduced
by cash received on the exit from the Zam Chick and
Zamhatch investments of R289,5 million.

The cash inflow from financing activities of R67,7 million
was due to the internal funding of the cane growers
being replaced with external funding.

Included in the non-cash items of R805,3 million are
depreciation and amortisation charges of R402,3 million,
impairments of R142,7 million and fair value adjustments
on biological assets within the Chicken and Sugar
business units of R229,0 million.

Capital expenditure
Capital expenditure for the six-month period was
R403,5 million (H1 2016: R544,4 million).

The upgrade to the pet food plant in the Grocery
business unit and the expansion at the Logistics
division’s Thekwini site have progressed well during
the period, with the Thekwini site being commissioned
in September 2016. In addition, investments have
been made in optimising the ERP platforms within the
Group, with the Pies and Beverages business unit SAP
implementations having gone live.

An amount of R354,6 million (H1 2016: R386,9 million)
has been contracted and committed, but not spent,
whilst a further R247,5 million (H1 2016: R254,5 million)
has been approved but not contracted. These amounts
mainly relate to ongoing replacement of critical
infrastructure within the divisions.

Impairment assessment
RCL FOODS has assessed the need for impairments
of assets and except for impairments processed in the
current period, no further write-downs are required at
31 December 2016. This will be reassessed at June 2017.

REVIEW OF OPERATIONS
CONSUMER DIVISION
The Consumer division grew revenue by 5,4% to
R7,1 billion (H1 2016: R6,7 billion). EBITDA for the
division declined by 55,2% to R224,9 million (H1 2016:
R501,6 million). The decline is mainly attributable to
the Chicken business, where EBITDA is down R248,7
million to a loss of R37,8 million in H1 2017. Key brands
within the Groceries’ business units have continued to
grow volumes in a competitive market environment.
The dedicated sales force has settled in well and efforts
to reduce costs have been successful. The innovation
pipeline across categories is strong and advances in
information technology are on track. Product costing
systems have been implemented and profitability
information can now be mined, which will continue to
improve decision-making. SAP has also been successfully
implemented in the Pies and Beverages business units
and is being rolled out to the remaining business units.

Chicken
The local poultry market remains massively oversupplied,
as a result of the substantial increase in dumped product
that has occurred in recent years.

The Chicken business unit delivered a first-half EBITDA
loss of R37,8 million (H1 2016 profit: R210,9 million), due
to the oversupply, as a consequence of the dumping
highlighted above, and an inability to recover cost
pressure as a result. This was compounded by weak
contractual demand as consumers traded down in a
tough economic environment, with total volumes down
8,5% to 165 757 tons for the period.

In order to restore profitability, the business remains
committed to reducing its exposure to consequential
volume whilst continuing to grow the demand-driven
portfolio, largely comprising the foodservice market.

IQF (‘Individually Quick Frozen’) Mixed Portions, which
are the primary source of consequential volume, have
decreased 50% over a three-year timeframe which, if
sold at current levels would have compounded losses
by up to R100 million. The Chicken business unit has
taken further steps to reduce consequential volumes in
the current period, by initiating a programme to reduce
its Hammarsdale operation to a single shift, thereby
eliminating a portion of loss-making IQF product.
The total cost of implementing these strategic actions in
the current period has been R194,1 million, comprising:

– a R142,2 million impairment to the fixed asset base as
a consequence of the downsizing, predominantly in
the IQF space;
– a R42,9 million provision for restructuring costs; and
– R9,0 million in biological assets write-downs, directly
related to the reduction in the size of flocks and bird
numbers at Hammarsdale in anticipation of moving
to a single shift.

The unfortunate outcome of these actions, is that they
will lead to a permanent contraction in production
capacity and employment opportunities in this region.
The situation will be monitored closely in the coming
months and further cutbacks may become necessary should the market
situation not improve.

In response to the crisis, Government and all other
poultry stakeholders attended a meeting in January
2017, where the industry crisis was acknowledged and
debated. A task team was established that would
result in meaningful measures to save the industry.
The local chicken industry is internationally competitive when trading
on a level playing field, however the dumping of imported chicken
leg quarters has materially distorted the market.

RCL FOODS remains firmly of the view that legitimate
phyto sanitary barriers which are widely used globally,
should be core to these measures, as opposed to simply
relying on duties and tariffs.

RCL FOODS is heartened that the crisis in the poultry
industry is being recognised and that Government
and industry players are starting to co-operate to find
solutions to circumvent the increasing destruction of the
industry and the related employment for large numbers
of South Africans. We look forward to positive outcomes
in this regard.

Regulations that limit brine injection to 15% for individual
frozen portions of chicken and 10% for whole carcasses
were implemented during the period. It is expected
that it will take some time for the market to settle in
terms of pack size and pricing points. The Quick Service
Restaurant (‘QSR’) accounts experienced a slight
volume decline during the period, in contrast to the
high growth performance historically, which is a further
indication of consumer pressure. The Rainbow added
value portfolio generated an acceptable performance,
with the Rainbow Freezer to Fryer category being a
particular highlight, growing volumes and market share
on the back of significant efforts to reignite the category.

Polony has been a challenge in respect of market share,
but the successful launch of a lower priced Rainbow
polony has allowed us to recover market share in that
sector.

Groceries
(Grocery, Beverages, Pies and Speciality)
Commodity input cost pressure and volume challenges
impacted on most of the business units with volumes
for the six months ended 31 December 2016 declining
1,3% relative to a depressed total market growth of
0,4% (Source: ask’d -an independent company that
specialises in providing benchmarks that measure
industry growth and trends, company performance
and consumer dynamics for a defined group, which
represents the majority of food manufacturers).
Pre-IAS 39 EBITDA was R262,7 million
(H1 2016: R290,7 million), down 9,6% on the
comparable period.

The Grocery business unit achieved volume growth
of 3,1% over the comparative period with increased
market shares in most of its categories, most notably
in Nola mayonnaise and Yum Yum peanut butter, whilst
managing to maintain margins. These gains were
further assisted by the launch of innovations in the
form of Nola squeeze mayo and Ouma rusks in a minis
format, amongst others. The recently won QSR sauce
business continued to perform strongly. Competitor
supply problems in pet food led to surplus demand for
RCL FOODS’ pet food brands, which resulted in short
supply in certain cases. These problems have largely
been resolved. The commissioning of the new pet food
plant remains on track, with full production expected by
December 2017 and, as a result, an exciting new range of
products remains on track for roll-out.

In the Beverages business unit trading was tough,
driven by colder summer temperatures which led to
reduced category consumption. The total beverage
category market has declined at double digit levels for
the six months ended 31 December 2016, compounded
by aggressive competitor activity resulting in share
loss of up to 4% on the prior year’s reading. The
combined impact of these two issues has resulted in
volume declining 10,2% over the prior year. Beverages
also voluntarily withdrew its shelf-stable (Ultra-high
temperature processing) Mageu innovation, due to a
quality and consistency issue that did not meet our high
standards. The intention is to relaunch the product once
this issue has been resolved.

The turnaround plans for the Pies business unit remain
on track and have been successful in stopping the
decline in volumes. A range of initiatives designed to
restore growth have been implemented, which include
the successful launch of Mighty Fine, a lower-priced
pie offering, increases in the quality and fill level in the
Classic range and reductions in the cost base. Pies also
has an innovation pipeline which will be rolled out over
the short-term in order to drive profitability.

The performance of the Speciality business unit has not
met our expectations, largely due to lower than expected
orders from our key customer, substantial cream supply
issues and higher than inflationary wage increases.
Speciality remains a key priority for RCL FOODS and
significant management attention is being invested to
improve performance.

SUGAR & MILLING DIVISION
The Sugar & Milling division’s revenue of R7,6 billion is in
line with the comparative period due to strong pricing
gains and a better channel mix being offset by a decline
in volumes as a result of the impact of the drought.
Despite the limited revenue growth, pre-IAS 39 EBITDA
increased by 20,7% to R578,2 million
(H1 2016: R479,3 million). The division made good
progress strategically, with steady improvements in the
sales mix towards higher margin channels and value
added products. The Sugar & Milling executive team was
restructured and a ONE RCL FOODS customer facing
team was implemented to provide customers with a
single contact point for all RCL FOODS categories.
This has started to generate benefits in terms of
improved customer focus, and enhanced commercial
information which is improving decision-making around
pricing and market mix.

Sugar
The drought conditions continued to impact production
volumes in the Sugar business unit and, if good summer
rains continue, this is expected to normalise towards the
end of the 2018 financial year. Dam levels remain low,
but are improving after some rain in the catchment
areas, however, more rain is needed for normal irrigation
to continue through winter. The cane crop decreased by
605 757 tons, resulting in some 64 992 tons less sugar
produced than the comparable period, with a negative
R40,0 million year-on-year impact from crop valuations.
Overall sales volumes for the period declined 33,5% to
248 677 tons as a result of the lower production. The
Sugar business unit benefited from more favourable
sugar prices and reduced imports which provided the
opportunity to sell almost the entire production in the
local market. These factors culminated in a pleasing
performance with EBITDA increasing by 69,6% to
R288,4 million (H1 2016: R170,0 million).

The pending sugar tax remains a risk to volumes in the
local market.

Animal Feed
The Animal Feed business unit experienced severe
drought-related input cost pressure, as well as volume
declines due to limited supply of molasses and smaller
herds. Pre-IAS 39 EBITDA declined by 20,9% to
R134,4 million (H1 2016: R169,9 million). As a supplier
of product to the poultry industry, the current crisis
in Chicken also presents a challenge for Animal Feed
with lower volumes affecting profit. The focus will
be on reducing the dependency on broiler feed and
growing a more diversified product basket. The loss of
feed volumes, as a result of the decision to reduce the
Hammarsdale operations to a single shift, will impact
the second half of the financial year.

Millbake (Milling & Baking)
The Millbake business unit’s results improved despite the
high commodity prices and margin pressure in Milling,
achieving growth of 11,5% and a pre-IAS 39 EBITDA of
R155,4 million (H1 2016: R139,4 million). Milling volumes
were down and excess capacity in the industry is a
significant challenge. Commodity prices should start
easing as better rainfall improves the outlook for wheat
and maize production with potential reductions in the
wheat levy providing further impetus.

The Baking business has substantially improved
profitability after resolving most of the operational issues
experienced in the prior year at the Gauteng bakeries.
Service levels, damages and returns in the Gauteng
bakeries have all improved substantially resulting in
increased bread volumes and higher margins.

LOGISTICS DIVISION
Logistics increased revenue for the six months by 6,2%
to R1 056,3 million (H1 2016: R994,5 million). EBITDA
increased 7,7% to R145,2 million (H1 2016: R134,9 million).

The performance has been mixed across the various
business areas, with tough economic conditions
remaining a key constraint. The poultry crisis and general
trading conditions in the Retail sector have resulted
in reduced volumes flowing through the network. The
general performance of the Foodservice sector has
been acceptable, despite certain customers experiencing
volume pressures as consumers redirected their spend.

Customers’ bulk storage requirements have reduced
significantly over the prior year, influenced by both
volume reductions in Chicken and lower requirements
from various manufacturers who have reduced their
stockholding to improve working capital or relocated
stockholding to their own facilities. New business
resulted in a pleasing six-month performance for Vector’s
Sales and Merchandising service. RCL FOODS’ Grocery
ambient distribution was successfully transitioned into
the Vector network with effect from 1 July 2016, as part
of the Group’s strategy to optimise its route-to-market.

The decision to reduce the Hammarsdale chicken
operation to a single shift will result in a loss of volumes
through the network in the second half of the financial
year.

EQUITY ACCOUNTED INVESTMENTS
RSSC
RCL FOODS’ Sugar business unit holds a 27,4%
shareholding in RSSC. RSSC’s results for the six months
ended 31 December 2016 improved significantly due to
improved sugar prices and access to additional water
for irrigation. The after-tax profit contribution was
R139,5 million (H1 2016: R78,3 million).

Senn Foods Logistics (‘Senn Foods’)
RCL FOODS acquired 49% of Senn Foods in Botswana
during 2014. Senn Foods continued to deliver
satisfactory results with an after-tax profit contribution
of R5,6 million (H1 2016: R3,9 million).

CASH DIVIDEND DECLARATION
The directors have resolved to declare an interim gross
cash dividend (number 84) of 10,0 cents per share for
the six months ended 31 December 2016
(H1 2016: 15,0 cents).

The dividend has been declared from income reserves.
Dividend withholding tax, at the rate of 15,0%, will amount to 1,5 cents
per share and consequently shareholders, who are not
exempt from dividend tax, will receive a net dividend
amount of 8,5 cents per share. The implications of the
Minister of Finance’s announcement of an increase in the
tax from 15,0% to 20,0%, in his budget speech of 22 February 2017
will be evaluated and communicated to shareholders once
clarity on implementation has been secured. The issued share capital
as at 31 December 2016 is 934 747 677. The company’s
income tax reference number is 9950019712.

The salient dates of the declaration and payment of the
interim dividend are as follows:

Last date to trade ordinary
shares cum dividend Tuesday, 18 April 2017
Ordinary shares trade
ex dividend Wednesday, 19 April 2017
Record date Friday, 21 April 2017
Payment date Monday, 24 April 2017

Share certificates may not be dematerialised or
rematerialised between Wednesday, 19 April 2017
and Friday, 21 April 2017 (both dates inclusive).

PROSPECTS
We expect demand, and therefore volumes, to remain
constrained. As a result, synergies, overhead savings
and production efficiencies will continue to receive
substantial focus. We have a good pipeline of innovations
across a number of product categories, designed to drive
further market share gains. Within the Sugar business
unit, rainfall, industry pricing and import levels remain
key drivers of profitability for H2 2017.

The outcome of the chicken industry’s crisis remains
uncertain, but we are satisfied that the South African
Government is aware of the enormity of the matter, and
we have taken substantial corrective action to safeguard
the business. The Hammarsdale downsizing will impact
on the Animal Feed and Logistics business units’ second
half results.

We remain confident in our strategy and are making
steady progress towards our goal of a diversified
portfolio, focused on adding higher margin, added
value products and categories. This set of results was
characterised by significant external pressures.

BASIS OF PREPARATION
The summary consolidated financial statements
have been prepared in accordance with International
Financial Reporting Standards (IFRS), the information
required by IAS 34 (Interim Financial Reporting), IFRIC
interpretations, SAICA financial reporting guides and in
compliance with the Companies Act of South Africa and
the Listings Requirements of the JSE Limited, under the
supervision of the Chief Financial Officer, Robert Field
CA(SA). The accounting policies comply with IFRS and
are consistent with those applied in the previous year,
except for the adoption of the amendments to IFRS
effective 1 July 2016, which have had no effect on the
results, apart from the amendments to IAS 16 (Property,
plant and equipment) and IAS 41 (Agriculture) regarding
bearer plants. The amendments to IAS 16 and IAS 41
require bearer plants to be accounted for in the same
way as property, plant and equipment because their
operation is similar to that of manufacturing.

The amendments to IAS 16 and IAS 41 has been applied
retrospectively in accordance with the transitional
provisions. Consequently, the Group has restated its
reported results throughout the comparative periods
presented.

The effect of the application of the amendments to
IAS 16 and IAS 41 on the reported results for the
six months ended 31 December 2015 and the year
ended 30 June 2016 are as follows:

31 December 30 June
2015 2016
R’000 R’000

Impact on profit
for the period
Increase/(decrease) in
operating profit before
depreciation, amortisation
and impairment (EBITDA) 6 407 (4 113)
Increase in depreciation,
amortisation and impairment (27 557) (56 935)
Decrease in income
tax expense 5 922 17 094
Decrease in amount
attributable to the equity
holders of the company (9 136) (28 827)
Decrease in amount
attributable to the non-
controlling interests (6 092) (15 127)

Impact on the statement
of financial position
Increase in property, plant
and equipment 243 810 207 470
Decrease in non-current
biological assets (457 652) (624 917)
Increase in current
biological assets 192 692 356 399
Decrease in equity (15 228) (43 954)
Decrease in deferred
income tax liabilities (5 922) (17 094)

RESULTS WEBCAST
AND CONFERENCE CALL
RCL FOODS will be hosting a webcast and conference
call to discuss the interim results at 10:00 on Friday,
24 February 2017. A presentation will be available
for download from the RCL FOODS website
www.rclfoods.com during the evening of Thursday,
23 February 2017.

For and on behalf of the Board

JJ Durand M Dally
Non-executive Chairman Chief Executive Officer

Durban
23 February 2017

Directors
JJ Durand (Non-executive Chairman)
M Dally (CEO)*
HJ Carse
RH Field*
PR Louw
NP Mageza
DTV Msibi
MM Nhlanhla
RV Smither
GM Steyn
GC Zondi
* Executive directors
Company secretary
JMJ Maher
Registration number: 1966/004972/06
JSE share code: RCL
ISIN: ZAE000179438
Registered office
Ten The Boulevard
Westway Office Park, Westville, 3629
Transfer secretaries
Computershare Investor Services Proprietary Limited
70 Marshall Street, Johannesburg, 2001
Auditors
PricewaterhouseCoopers Inc.
Sponsor
Rand Merchant Bank
(a division of FirstRand Bank Limited)
Bankers
ABSA Bank Limited
First National Bank of Southern Africa Limited
Standard Bank Limited
Website
www.rclfoods.com

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016

Restated Restated
31 December 31 December 30 June
2016 2015 2016
R’000 R’000 R’000

ASSETS
Non-current assets
Property, plant and equipment 5 809 381 5 784 565 5 903 566
Intangible assets 2 229 186 2 591 346 2 283 999
Investment in joint ventures 216 538 412 427 206 036
Investment in associates 607 884 533 777 485 054
Deferred income tax asset 10 724 21 488 19 658
Loans receivable 1 555 42 681 1 555
Trade and other receivables 12 788 12 288
Goodwill 2 658 493 3 035 823 2 658 493
11 546 549 12 422 107 11 570 649
Current assets
Inventories 3 285 702 2 869 626 2 940 337
Biological assets 709 215 732 972 968 159
Trade and other receivables 4 238 687 3 773 155 3 926 404
Derivative financial instruments 2 052 40 393 8 036
Tax receivable 25 710 30 210
Loan receivable 15 330 41 342
Cash and cash equivalents 558 540 765 150 744 639
8 835 236 8 181 296 8 659 127
Total assets 20 381 785 20 603 403 20 229 776
EQUITY
Capital and reserves 10 221 640 10 647 106 10 046 256
LIABILITIES
Non-current liabilities
Deferred income 330 3 127 734
Interest-bearing liabilities 3 585 790 3 640 094 3 598 846
Deferred income tax liabilities 1 256 416 1 448 135 1 352 915
Retirement benefit obligations 142 394 189 538 165 354
Trade and other payables 5 716
4 984 930 5 280 894 5 123 565
Current liabilities
Trade and other payables 4 402 664 3 904 256 4 514 392
Deferred income 8 323 4 178 3 928
Interest-bearing liabilities 191 985 127 948 112 402
Derivative financial instruments 39 632 14 208 38 828
Current income tax liabilities 86 808 72 629 8 966
Bank overdraft 445 803 552 184 381 439
5 175 215 4 675 403 5 059 955
Total liabilities 10 160 145 9 956 297 10 183 520
Total equity and liabilities 20 381 785 20 603 403 20 229 776

CONSOLDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 31 DECEMBER 2016

Restated Restated
Six months Six months Year ended
31 December 31 December 30 June
2016 2015 2016
R’000 R’000 R’000

Revenue 13 085 486 12 875 309 25 025 159
Operating profit before depreciation, amortisation
and impairment (EBITDA) 900 437 1 152 232 1 762 387
Depreciation, amortisation and impairment (544 981) (390 967) (1 445 222)
Operating profit 355 456 761 265 317 165
Finance costs (194 385) (143 237) (365 194)
Finance income 13 213 9 532 38 361
Share of profits of joint ventures 24 376 20 974 44 527
Share of profits of associates 139 338 76 244 64 796
Profit before tax 337 998 724 778 99 655
Income tax expense (70 426) (23 673) 82 986
Profit for the period 267 572 701 105 182 641
Attributable to:
Equity holders of the company 321 713 736 710 182 022
Non-controlling interests (54 141) (35 605) 619
HEADLINE EARNINGS
Profit for the period attributable to equity holders of the company 321 713 736 710 182 022
(Profit)/loss on disposal of property, plant and equipment (10 415) (9 853) 5 569
Loss on disposal of biological assets 6 795 6 796
Insurance proceeds (2 985) (2 880) 152
Recycling of foreign exchange translation reserve 51 163
Impairment loss 102 724 11 906 587 211
Headline earnings 411 037 742 678 832 913
Earnings per share attributable to equity holders of the company
Basic earnings per share (cents) 37,2 85,5 21,1
Basic earnings per share – diluted (cents) 37,1 85,5 21,0
Headline earnings per share (cents) 47,6 86,2 96,5
Headline earnings per share – diluted (cents) 47,4 86,2 96,3

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 31 DECEMBER 2016

Restated Restated
31 December 31 December 30 June
2016 2015 2016
R’000 R’000 R’000

Profit for the period 267 572 701 105 182 641
Other comprehensive income
Items that will not be reclassified to profit and loss
Remeasurement of retirement medical obligations – net of tax 154
Share of associates other comprehensive income (3 286)
Items that may be reclassified subsequently to profit and loss
Share of associates other comprehensive income (1 867)
Cash flow hedges (1 635) (12 940) (17 598)
Currency translation differences (3 455) 384 18 668
Other comprehensive income for the period – net of tax (5 090) (12 556) (3 929)
Total comprehensive income for the period 262 482 688 549 178 712
Total comprehensive income for the period attributable to:
Equity holders of the company 316 623 724 154 178 093
Non-controlling interests (54 141) (35 605) 619
262 482 688 549 178 712

CONSOLIDATED CASH FLOW INFORMATION
FOR THE SIX MONTHS ENDED 31 DECEMBER 2016

Restated Restated
Six months Six months Year ended
31 December 31 December 30 June
2016 2015 2016
R’000 R’000 R’000

Operating profit 355 456 761 265 317 165
Non-cash items 805 264 425 797 1 026 605
Operating profit before working capital requirements 1 160 720 1 187 062 1 343 770
Working capital requirements (1 057 544) (801 821) 118 591
Cash generated by operations 103 176 385 241 1 462 361
Net finance cost (177 512) (161 570) (325 470)
Tax paid (75 016) (180 769) (254 560)
Cash available from operating activities (149 352) 42 902 882 331
Dividend received 28 004 33 281 68 595
Dividends paid (130 664) (190 545) (320 091)
Cash outflows from investing activities (66 107) (561 962) (1 015 960)
Cash inflows/(outflows) from financing activities 67 656 18 784 (123 453)
Net movement in cash and cash equivalents (250 463) (657 540) (508 578)
Cash and cash equivalents at the beginning of the period 363 200 870 506 870 506
Exchange rate translation 1 272
Cash and cash equivalents at the end of the period 112 737 212 966 363 200

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 31 DECEMBER 2016

Common Share- Controlling Non-
Stated Other control based Retained interest controlling
capital reserves reserve payments earnings total interests Total
R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

Balance at 1 July 2015 9 992 815 24 447 (1 919 832) 391 716 1 545 571 10 034 717 78 782 10 113 499
Profit/(loss) for the period* 736 710 736 710 (35 605) 701 105
Other comprehensive income for the period (12 556) (12 556) (12 556)
Ordinary dividend paid (189 545) (189 545) (1 000) (190 545)
BEE share-based payments charge 8 800 8 800 8 800
Employee share option scheme:
Proceeds from shares issued 30 979 30 979 30 979
Value of employee services 25 526 25 526 25 526
Exercise of employee share options (29 702) (29 702) (29 702)

Balance at 31 December 2015* 10 023 794 11 891 (1 919 832) 396 340 2 092 736 10 604 929 42 177 10 647 106
(Loss)/profit for the period* (554 688) (554 688) 36 224 (518 464)
Other comprehensive income for the period 13 626 (4 999) 8 627 8 627
Ordinary dividend paid (129 547) (129 547) 1 (129 546)
BEE share-based payments charge 8 800 8 800 8 800
Employee share option scheme:
Proceeds from shares issued 10 10 10
Value of employee services 29 733 29 733 29 733
Exercise of employee share options (10) (10) (10)

Balance at 30 June 2016* 10 023 804 25 517 (1 919 832) 434 863 1 403 502 9 967 854 78 402 10 046 256
Profit/(loss) for the period 321 713 321 713 (54 141) 267 572
Other comprehensive income for the period (5 090) (5 090) (5 090)
Ordinary dividend paid (129 598) (129 598) (1 066) (130 664)
BEE share-based payments charge 8 800 8 800 8 800
Employee share option scheme:
Proceeds from shares issued 4 733 4 733 4 733
Value of employee services 34 766 34 766 34 766
Exercise of employee share options (4 733) (4 733) (4 733)

Balance at 31 December 2016 10 028 537 20 427 (1 919 832) 473 696 1 595 617 10 198 445 23 195 10 221 640

*The prior year information has been restated for the impact of amendments to IAS 16 ‘Property, Plant and Equipment’ and IAS 41 ‘Agriculture’ regarding bearer plants.

SUPPLEMENTARY INFORMATION
FOR THE SIX MONTHS ENDED 31 DECEMBER 2016
Restated Restated
Six months Six months Year ended
31 December 31 December 30 June
2016 2015 2016
R’000 R’000 R’000

Capital expenditure contracted and committed 354 612 386 903 323 299
Capital expenditure approved but not contracted 247 496 254 480 227 199
STATISTICS
Statutory ordinary shares in issue (includes BEE shares) (000s) 934 748 934 409 934 410
Ordinary shares in issue for accounting purposes (000s) 863 989 863 650 863 651
Weighted average ordinary shares in issue (000s) 863 844 861 837 862 739
Diluted weighted average ordinary shares in issue (000s) 867 257 861 844 864 727
Net asset value per share (cents) 1 183,1 1 232,8 1 163,2
Ordinary dividends per share:
Interim dividend declared (cents) 10,0 15,0 15,0
Final dividend declared (cents) 15,0
Total dividends (cents) 10,0 15,0 30,0

SEGMENTAL ANALYSIS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2016

Restated Restated
Six months Six months Year ended
31 December 31 December 30 June
2016 2015 2016
R’000 R’000 R’000

Revenue 13 085 486 12 875 309 25 025 159
Consumer 7 072 804 6 708 636 13 301 265
Sugar & Milling 7 613 006 7 612 137 14 914 754
Logistics 1 056 302 994 505 1 986 899
Sales between segments:
Consumer to Sugar & Milling (133 241) (100 982) (210 105)
Sugar & Milling to Consumer (1 981 292) (1 790 613) (3 864 143)
Logistics to Consumer (527 995) (535 058) (1 078 012)
Logistics to Sugar & Milling (14 098) (13 316) (25 499)
Operating profit before depreciation, amortisation
and impairment (EBITDA) pre-IAS 39 935 716 1 109 119 1 842 957
Consumer 224 871 501 621 701 653
Sugar & Milling 578 233 479 258 826 010
Logistics 145 230 134 866 260 662
Unallocated group costs (12 618) (6 626) 54 632
IAS 39 Adjustment (35 279) 43 113 (80 570)
Operating profit before depreciation, amortisation
and impairment (EBITDA) 900 437 1 152 232 1 762 387
Depreciation, amortisation and impairment (544 981) (390 967) (1 445 222)
Operating profit/(loss)
Consumer (113 196) 328 911 345 714
Sugar & Milling 382 986 338 017 (258 075)
Logistics 102 979 101 653 184 962
Unallocated group costs (17 313) (7 316) 44 564
Operating profit 355 456 761 265 317 165
Finance costs (194 385) (143 237) (365 194)
Finance income 13 213 9 532 38 361
Share of profits of joint ventures 24 376 20 974 44 527
Sugar & Milling 18 795 9 736 22 661
Logistics 5 581 3 850 8 359
Zambian operations 7 388 13 507
Share of profit of associates 139 338 76 244 64 796
Sugar & Milling 139 504 78 312 68 530
Ugandan Operation (166) (2 068) (3 734)
Profit before tax 337 998 724 778 99 655

Date: 23/02/2017 05:01:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (‘JSE’).
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.

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