Consolidated Interim Financial Statements for Rhodes Food Group – Ended 1 April 2018

Rhodes Food Group is a producer of fresh, frozen and long life convenience meal solutions for customers and consumers across South Africa, sub-Saharan Africa and in major global markets. The portfolio of market leading brands, which includes Rhodes, Bull Brand, Magpie, Squish, Bisto, Hinds and Pakco, is complemented by private label product ranges packed for all major South African retailers and international customers.

Download the full report here: Consolidated Interim Financial Statements for the six months ended 1 April 2018

Group turnover for the six months increased by 9.3% to R2.7 billion.

Turnover in the regional segment (South Africa and the rest of Africa) increased by 8.8%, driven by volume growth of 7.3%, and accounted for 83% of total turnover.

– Long Life Foods increased turnover by 13.4% (9.2% volume growth) with strong performances in fruit juice, dry foods (formerly Pakco), canned vegetables and the meat category which showed an encouraging recovery.
– The Group’s brands have gained or maintained market share across core product categories.
– Fresh Foods sales increased by 1.9% on flat volumes, with ready meals and the pie category proving resilient in the current consumer environment. The turnaround in Ma Baker has been completed.

International turnover increased by 12.3%, benefiting from the weaker Rand and growth in export volumes of 2.7%.

The Group’s gross profit increased by 8.1% to R685.3 million. The gross profit margin was slightly lower at 25.0% (2018: 25.3%).

The margin was negatively impacted by approximately R23 million relating to the lower international selling prices of deciduous canned fruit products as a result of drought-related quality issues, and once-off costs of approximately R14 million arising from the relocation of the pulps and purees plant from Wellington to Groot Drakenstein. The business experienced further margin pressure due to low levels of inflation. These pressures were partially offset by tailwinds of approximately R22 million from the weakening currency.

Operating costs were contained to an increase of 5.8% despite the higher depreciation charges arising from the increased capital expenditure over the past two years.

The Group’s operating profit increased by 6.0% to R172.7 million while the operating margin declined by 20 basis points to 6.3%.

The regional operating margin was diluted by the impact of the once-off costs arising from the relocation of the pulps and purees plant, low selling price inflation and higher depreciation costs, reducing from 7.8% to 7.4%.

The international operating margin improved from -0.3% to 0.8% as the segment benefited from the 10.5% weakening in the value of the Rand against the Group’s major trading currencies. Profitability was materially impacted by the drought-related impact on costs and quality of canned fruit.

Headline earnings increased by 2.1% to R84.1 million, with diluted headline earnings per share 2.2% higher at 32.1 cents.

The heightened focus on working capital management is reflected in the increase in net working capital being contained to 2.4%, with inventory levels 1.7% lower. Net working capital days improved to 129 days from 139 days in the previous year.

The improvements in working capital management and lower capital expenditure contributed to stronger cash flows. The Group’s net debt to equity ratio improved to 58.9% from 60.4% at the end of March 2018.

The Group invested R129 million (2018: R268 million) in capital projects in the first half of the financial year. These included the completion of the relocation of the pulps and purees plant, the expansion of the Western Cape ready meals facility and the site upgrade at the Groot Drakenstein production hub.

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