RFG Sales Up 10% on Strong Domestic Demand

RFG increased group turnover by 9.6% to R2.9 billion in the six months to end March 2020 as the regional business across South Africa and sub-Saharan Africa grew sales by 11.5%.

The Western-Cape based food producer said sales for the month of March were 22% higher as households stocked up on essential foods following the state of disaster being declared and ahead of the national lockdown.

RFG owns market-leading brands Rhodes, Bull Brand, Magpie, Squish, Bisto, Hinds and Pakco.

RFG’s international business was severely impacted by the slowdown in exports of canned fruit to China from early January following the outbreak of Covid-19 and grew sales by only 0.5% for the six months.

The recent sudden and rapid devaluation of the Rand resulted in net foreign exchange losses of R47.6 million, contributing to the group’s operating profit declining by 5.3% to R160.7 million. Headline earnings were 3.0% lower at R81.6 million, with diluted headline earnings per share down 3.1% at 31.1 cents.

Chief executive officer Bruce Henderson said the regional business, which accounts for 84% of group revenue, grew volumes by 6% and has seen sustained higher demand for canned goods throughout the first seven weeks of lockdown.

In the six months to March, long life food sales increased by 12.6%. Good growth was reported in fruit juices and canned vegetables and particularly strong sales in canned vegetables and meat products in March before the start of the lockdown.

Fresh food sales increased by 9.6%, with ready meals and pies being the main growth drivers.

Henderson said RFG has experienced a continued uplift in demand for long life products during the lockdown. Sales of canned fruit, vegetables and meat have been particularly strong, and production has been increased to meet the demand. Government restrictions on the sale of hot meals, implemented more than three weeks into lockdown, have resulted in a marked slowdown in the sale of pies.

“As an essential service under the state of disaster regulations, RFG has continued to operate throughout the lockdown. While we have a national imperative to ensure the ongoing supply of food products during lockdown our priority is the safety and well-being of our employees,” he stressed.

He said the group has effective protocols and experienced operational management teams to reduce the risk of factory closures and allow for rapid cleaning and reopening in the event of infections.

RFG’s fruit canning factory in Tulbagh in the Western Cape was recently closed for four days for deep cleaning following nine employees testing positive for Covid-19 over the past month. RFG is one of the largest employers in the Witzenberg region which is a Covid-19 hotspot, having recorded over 200 positive cases.

RFG has established an employee assistance fund to support staff who are financially impacted by Covid-19 related factory closures. The CEO contributed 50% and the rest of the executive team 30% of their salaries for three months, with senior management contributing on a voluntary basis. Board members have contributed 30% of their directors’ fees for the same period.

On the outlook for the months ahead, Henderson said owing to the negative impact of Covid-19 on the economy, the group is focusing on cash preservation through tighter cost management, reviewing all non-critical expenditure and maximising exports to strengthen cash flows.

“Consumer spending is coming under extreme pressure as the economy suffers the effects of the lockdown and our broad range of product categories is providing resilience in this environment. Pie sales will be allowed in level 3 lockdown and we expect a quick and strong recovery in this category.”

“We expect a slow recovery in the export of canned fruit into China from around July this year. However, the recent deterioration in the Rand/US dollar exchange rate will have a significant benefit on international profitability in the second half of the financial year which will help to bring about a recovery in this segment of our business,” he added.

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