RFG Foods Holdings (RFG) grew turnover by 11.2% to R5.1 billion in the year to September 2018 as trading conditions deteriorated in South Africa and the international division encountered several external headwinds.
The Western Cape-based food producer, which owns a growing portfolio of market-leading brands including Rhodes, Bull Brand, Magpie, Squish, Bisto, Hinds and Pakco, grew sales in South Africa and sub-Saharan Africa by 11.9%.
International sales increased by 8.4% on the back of a strong recovery in export volumes in the second half of the year.
Higher canned fruit costs due to the drought in the Western Cape over the last two years, together with the weak industrial fruit puree market, contributed to the international division posting a loss of R5 million for the year, from a profit of R58 million last year.
The R63 million movement in the international operating profit had a significantly negative impact on the group’s results, contributing to headline earnings declining by 32.9% to R159 million. RFG declared a cash dividend of 20.3 cents per share, 34.7% lower than last year.
Chief executive officer Bruce Henderson said the regional business delivered a resilient performance as trading conditions deteriorated in the second half of the year owing to increasing pressure on consumer disposable income. In this slowing economic environment sales in certain product categories are increasingly being driven by promotions, he said.
Sales in the fresh foods division grew by 10.3% with a good performance from the pie category. The long life foods division increased sales by 13.1% with fruit juice continuing to grow strongly. Dry foods, including the Bisto, Hinds, Southern Coating, Trotters and Pakco brands, performed well and benefited for the relaunch of the brand portfolio late in the first half of the year.
RFG’s brands continued to gain market share, with the Rhodes brand the country’s market leader in canned pineapple and canned tomato. Rhodes is the number two brand in canned fruit, jam and canned vegetables as well as the recently entered categories of 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.
RFG owns 15 production facilities across South Africa and Eswatini. As part of an increased capital investment programme, RFG has invested close to R1 billion over two years to expand capacity and enhance production efficiencies. This includes investing in new and upgraded facilities, mainly for new product categories which the group has entered through the acquisition of other food producers.
Major projects undertaken this year include the installation of a juice concentrate plant at Groot Drakenstein, commissioning a new baked bean production facility in Gauteng, expanding the Western Cape ready meals plant and the upgrade of infrastructure at the Groot Drakenstein production hub adjacent to the group’s head office. Capital investment of R200 million is planned for the 2019 financial year.
RFG is in the process of concluding a transaction to purchase a protein snacking business from RCL for R30 million, with the transaction subject to standard approvals. The business produces protein snack foods for Woolworths and will be integrated into RFG’s ready meals operation in Groot Drakenstein.
Discussing the prospects for the year ahead, Henderson said the focus in the regional business will on driving organic growth, increasing brand shares and improving margins.
“Good rainfall in the Western Cape and the weaker currency are expected to contribute to our international business being restored to profitability in 2019.”
“Our major two-year capital investment programme is nearing completion and the group is well positioned to start generating returns on these assets,” he added.
Ends
Issued by Tier 1 Investor Relations on behalf of RFG Foods
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Graeme Lillie
Tier 1 Investor Relations
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