JOHANNESBURG (Reuters) – South African food producer RCL Foods said on Thursday it expects its half year profit to fall as much as 26.8% due to high commodity and energy costs in its chicken and baking businesses, sending its shares down more than 6%.
Food and consumer goods companies worldwide have been grappling with soaring costs for raw materials, energy, transportation and packaging for over two years.
Though many consumers seem to accept the resulting price increases, the hikes have only partially offset higher input costs, squeezing companies’ margins.
RCL, which owns the Selati sugar, Ouma Rusks and Rainbow Chickens brands, said its headline earnings per share (HEPS)- the main profit measure in South Africa – for the six months ending in December is expected to be between 20.1-26.8% lower.
By 1117 GMT, RCL shares had fallen by 6.86% to a 17 month low.
RCL said above inflationary price increases for other costs, particularly energy and packaging, and unprecedented levels of power cuts, added to the cost base, “with the latter further impacting production and service levels.”
After a number of its generating units failed, the country’s state-owned power utility implemented severe power cuts in December lasting up to 10 hours a day. The outages have continued into 2023.
“As a result, margins came under pressure and price increases to recover cost push had to be carefully managed in order to protect volumes,” the company said.
(Reporting by Nqobile Dludla; Editing by Ben Dangerfield)