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Stronger Results from Rhodes Food Group as Sales Up 9%

Rhodes Food Group Holdings (RFG) reported an improving performance for the six months to March 2019 as turnover increased by 9.3% to R2.7 billion and operating profit by 6% to R173 million. Headline earnings recovered to increase by 2.1% to R84 million.

The Western Cape-based food producer, which owns market-leading brands Rhodes, Bull Brand, Magpie, Squish, Bisto, Hinds and Pakco, grew sales in its regional business by 8.8%.

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

Chief executive officer Bruce Henderson said the regional business across South Africa and sub-Saharan Africa posted a resilient performance, with strong volume growth in an environment of low inflation and constrained consumer spending.

He said the group’s profitability was impacted by the effect of the Western Cape drought on the quality of deciduous canned fruit. Costs arising from the relocation of the group’s pulps and purees plant from Wellington to Groot Drakenstein also impacted profitability.

“These factors were partially offset by tailwinds from the 10.5% weakening in the Rand against our major trading currencies,” he said.

Sales in the long life foods division grew by 13.4% with volume growth of 9.2%. Good growth was reported in the fruit juice, dry foods and canned meat categories, while canned vegetables showed a solid recovery. Fresh foods increased sales by 1.9% with ready meals and pies proving resilient in the current tough consumer climate.

RFG’s brands continued to gain market share across core product categories, with the Rhodes brand the country’s market leader in canned fruit, canned pineapple and canned tomato. Rhodes is the number two brand in jam, canned vegetables, fruit juice and infant meals. Bull Brand is the market leader in corned meat, Southern Coating the number one brand in coatings, with the iconic Bisto brand number two in the gravy category.

Henderson said RFG recently completed the R30 million acquisition of RCL’s protein snack food business. The business produces protein snacks such as meat balls and chipolata sausages for Woolworths and has been integrated into RFG’s Western Cape ready meals facility.

RFG owns 15 production facilities across South Africa and Eswatini. As part of an increased capital investment programme, close to R1 billion was invested over the past two years to expand capacity and enhance production efficiencies. This included investing in new and upgraded facilities, mainly for new product categories which the group has entered through acquisitions over the past five years since listing on the JSE.

The group invested R129 million in capital projects in the first half. This included the expansion of its Western Cape ready meals facility, completion of the relocation of the pulps and purees plant from Wellington, and the site upgrade at the Groot Drakenstein production hub adjacent to the group’s head office. Capital investment of R80 million is planned for the second half of the financial year.

On the outlook for the remainder of the year, Henderson said the group expects a strong second half performance despite consumer spending being under severe pressure.

“Our regional business will continue to focus on driving organic growth, increasing brand shares and improving margins.”

He said the international division is expected to continue to improve its operating margin in the second half. “The deciduous fruit production season has recently been completed and early indications are that the quality of fruit has improved after being affected by the drought for the past two years.”

“After completing our major capital investment programme, we are focused on generating returns on the capital invested and extracting benefits to improve margins across the business,” he added.

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