RFG reported a resilient performance in the year to September 2020 as turnover increased by 8.3% to R5.9 billion, despite COVID-19 impacting sales and profitability in the fruit juice and pie categories, and severely curtailing exports to China.
The Western-Cape based food producer, which owns market-leading brands Rhodes, Bull Brand, Magpie, Squish, Bisto, Hinds and Pakco, increased sales across South Africa and sub-Saharan Africa by 6.6%, with international sales growing by 15.5%.
While the depreciation of the Rand boosted sales and profitability in RFG’s international business, the benefit was negated by net foreign exchange hedging losses of R54.6 million and significantly lower exports of canned fruit to China.
These factors contributed to the group’s operating profit being unchanged at R392 million, with headline earnings 3.2% higher at R227 million. The dividend was increased by 3.2% to 28.8 cents per share. Cash generated from operations increased by 21.6% to R602 million and the group reduced its debt by R238 million.
Chief executive officer Bruce Henderson said Covid-19 and the lockdown restrictions created an abnormal trading environment in the second half of the financial year. “The lockdown impacted key product categories and sales channels, and resulted in higher costs, temporary factory closures and pressure on consumer spending.”
Sales of long life foods increased by 9.6%, with strong growth in canned and dry foods. Growth was offset by a decline in fruit juice sales which were seriously impacted for five months during lockdown, mainly due to restrictions on entertainment and the closure of schools. The group exports long life foods into 12 countries in the rest of Africa where sales grew by 18.8%.
Fresh foods sales grew by 1.7%. While ready meals performed well during lockdown, pie sales declined sharply from April to June due to government restrictions on the sale of hot meals in the earlier stages of lockdown and the slowdown in convenience store traffic.
International sales increased by 15.5% owing largely to the depreciation of the Rand against RFG’s basket of trading currencies. Owing to the outbreak of Covid-19, limited shipments were made to China in 2020. Most of the shipments destined for China were sold in other markets at significantly lower margins. Exports were further impacted by constraints at the Cape Town port during the first three months of lockdown.
Henderson said the three categories most impacted by Covid-19 have all experienced encouraging recoveries. “Juice sales showed a turnaround in September and October, pie sales have made a pleasing recovery since lockdown restrictions were relaxed, while canned fruit export volumes to Asia have shown an improving trend since July.”
RFG is South Africa’s leading manufacturer of canned fruit, jams and canned meat. The group’s brands continued to gain market share across core product categories in the past year, with the Rhodes brand being the country’s market leader in canned pineapple and canned tomato. Rhodes is the number two brand in canned fruit, fruit juice, baby food, jam and canned vegetables. Bull Brand is the market leader in corned meat.
RFG is planning capital investment of R250 million in the year ahead, including the installation of an additional production line and building a new warehouse at its fruit juice factory in Wellington, and an additional filling line in the baby food factory at the Groot Drakenstein production hub.
On the outlook for the year ahead, Henderson said that while COVID-19 will continue to impact the group into 2021 through slower sales due to the deteriorating economic conditions in the country and weaker consumer spending, compounded by rising unemployment in the country, the outlook was still favourable.
“Our broad range of product categories should continue to provide resilience in this environment, supported by the continuing recovery of the fruit juice and pie categories and the ongoing customer demand for canned and dry foods, and ready meals.
“We also continue to evaluate opportunities for strategic, bolt-on acquisitions which are aligned to the group’s core product categories,” he said.