RFG Earnings up 57% On Strong International Recovery

RFG Holdings increased headline earnings by 57% to R361 million in the year to September 2022 as its international division capitalised on higher global demand for canned fruit products and delivered a strong recovery in profitability.

The Western-Cape based food producer, which owns market-leading brands Rhodes, Bull Brand, Magpie, Squish, Hinds and Today, increased revenue by 21.9% to R7.3 billion and operating profit by 54.1% to R574 million

The group’s dividend was increased by 57.4% to 45.8 cents per share.

CEO Pieter Hanekom said the group delivered strong sales growth for the year, with the regional business posting a resilient performance in the constrained consumer spending environment and benefiting from the Today acquisition.

The Today pie business, which is the tenth acquisition by RFG since listing on the JSE in 2014, was successfully integrated into the group’s operations, generating revenue of R147 million for the eight months since being acquired.

The international division, accounting for 25% of group revenue, experienced robust growth in export volumes due to increased demand for canned fruit and fruit puree products. International revenue grew by 57.4% with export volumes up 18.3%. The group increased production volumes to meet the higher market demand arising from the failure of last year’s peach crop in Greece, the world’s largest exporter of canned peaches.

International revenue benefited by R118 million due the weakening in the Rand against the group’s basket of trading currencies.

Revenue in the regional business increased by 13.5%. Fresh foods grew revenue by 19.9%, with ready meals achieving good volume growth and proving resilient in the weak spending environment. Long life revenue grew by 9.9%, with fruit juice being the main revenue driver.

RFG’s products are sold in 12 other African countries and revenue from these territories grew by 14.5% to R414 million.

The sales performance for the year ensured that RFG maintained its market share positions in all product categories. RFG is South Africa’s leading manufacturer of canned fruit, jams and canned meat. The Rhodes brand is the country’s market leader in canned pineapple and canned tomato and the number two brand in canned fruit, fruit juice, baby food and canned vegetables. Bull Brand is the market leader in corned meat.

Hanekom said the regional business continued to be impacted by significant input cost inflation, mainly from cans, meat, fats and oils, which affected sales and profitability mainly in canned meat, canned vegetables and pies. The cost increases were not fully recovered which adversely impacted the profitability of the regional business, although the margin started to recover in the latter months of the financial year.

RFG has 14 production facilities across South African and Eswatini, located close to end markets and sources of raw materials. During the past year the group invested R260 million in the maintenance and expansion of these facilities. This included the completion of a new warehouse at the fruit juice plant in Wellington, the integration of the Today pie business, equipment upgrades at the Eswatini and Gauteng pie facilities and the completion of the pineapple plantation expansion in Eswatini. Capital investment of R250 million is planned for the 2023 financial year.

The group is expanding its renewable energy infrastructure to reduce the impact of loadshedding. Solar installations are planned for a further three production sites in the new financial year. The group is also investing in increasing water storage capacity at some facilities to mitigate the impact of electricity related water supply interruptions.

On the group’s plans for the year ahead, Hanekom said management aims to drive organic growth to expand brand shares. “The significant inflationary input cost pressures experienced in the past year appear to be stabilising and we are focusing on recovering increased costs from the market. Price, volume and margin management will be important to restore the profitability in the regional business.”

“We expect to maintain the momentum in our international business owing to the improvement in international pricing and ongoing strong demand for our high quality canned fruit products. The fruit intake will normalise in the new year relative to the higher intake of the prior year due to the increased demand following the Greek crop failure. The group continues to diversify its international sales and expand into new markets, including South America.”

“We will continue to evaluate opportunities for value-accretive bolt-on acquisitions aligned to the group’s strategy and core product categories,” he added.

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