Sugar imports impede RCL Foods’ profits

Food company RCL Foods, manufacturer of Selati sugar and Molatek animal feed products, warns the South African sugar industry is in crisis due to the influx of cheap imported sugar into the local market.

By Vida Booysen, senior journalist at African Farming and Landbouweekblad

The JSE-listed company’s underlying earnings before interest, tax, depreciation and amortisation (EBITDA) fell by 14,6 % to R1  185 billion in the half‑year to the end of December 2025. Revenue decreased by 1,9 % to R13,3 billion in the same period.

This decline is mainly due to the poor performance of RCL Foods’ sugar division, where underlying EBITDA has almost halved compared with the previous corresponding period: from R637,8 million in December 2024 to R386,8 million in December 2025. “The sugar division is experiencing headwinds and volatility due to insufficient tariff protection, lower sugar prices in world markets and the stronger rand, which has led to a significant increase in deep‑sea imports of sugar that is negatively impacting our results,” explains Rob Field, CFO of RCL Foods.

“In addition, local market prices of sugar have remained unchanged, which is putting pressure on our profit margins. We simply have to absorb the higher input costs and have not been able to pass them on to consumers.”

He warns it is not only companies like RCL Foods that are struggling to sell locally produced sugar profitably. “As things stand, the local market is being denied R1,5 billion due to imported sugar. This affects us all, but especially local sugarcane growers. Up to 64 % of the yield and income goes to our growers.”

So far this year, 164 000 tons of sugar have already been imported, which makes the risk to the local industry even greater, even though the government is now trying to crack down on imported sugar. “So far, the dollar‑based reference price, the tariff mechanism that is supposed to prevent dumping of cheap sugar, has not been adjusted. I am not sure what impact the war in the Middle East will have on the international sugar price, but if everything remains the same, there is still an opportunity for people to import sugar opportunistically, which will further increase the already significant negative impact on the local industry,” Field says.

Urgent discussions are currently underway with the government and the International Trade Administration Commission (ITAC) to reconsider the outdated tariff mechanism and replace it with something more effective.

“The argument that we as an industry are making is that the mechanism, which has been in place for many years, does not protect us. When it finally comes into effect, it will be too little, too late to do anything about our situation. The industry is really in a very difficult position and we are putting a lot of pressure on the government to resolve the issue. Unfortunately, these processes take time, it will not change overnight. The best-case scenario is that we can expect an announcement by April.”

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Molatek volumes fall

Molatek, which processes sugar byproducts such as molasses into animal feed products, saw its sales volume fall by 13,9 % compared with the same period in 2024. Field attributes this to higher rainfall, which has improved the quality of natural pasture and reduced the need for animal feed supplements. “Ongoing challenges arising from the foot‑and‑mouth disease outbreak are also restricting the movement of livestock and putting a damper on overall market demand.”

RCL Foods’ grocery division, which includes brands such as Bobtail dog food, Catmor cat food, Ouma rusks and Yum Yum peanut butter, delivered a resilient performance, according to Field. Underlying EBITDA increased by 8,7 % to R371,2 million.

The baked goods division, which includes RCL’s bread brands, pies and its mills, maintained a stable performance with underlying EBITDA increasing by 0,2% to R413,6 million.

Field emphasised that the group has focused very sharply on the cost factors it can control in recent years. “Even in the cyclical sugar industry, we are still doing business on a healthy footing. Everything within our control is in very good shape at the moment: the efficiency of our mills, the quality of the crops, the increase in our yields. So, given the setback we are experiencing due to imported sugar, it is still not a bad result. We have been able to push the low‑water mark of our sugar division.”

RCL Foods has declared an interim dividend of 15c per share. Field also expects the food group to deliver a solid performance in the remaining six months of the financial year, even if consumer demand remains subdued. “We are confident in the resilience of our business and our ability to improve earnings by continuing to focus on the factors within our control.”