RFG grows its interims amid constrained consumer environment

RFG Holdings, which owns market-leading brands such as Rhodes, Bull Brand, Magpie, Squish and Hinds, delivered strong interim revenue growth and earnings, despite the constrained consumer environment in South Africa and the logistics challenges that affected the export business.

The Western-Cape-based food producer posting its results for the six months ended April 3, 2022, said revenue grew by 20.9 percent to R3.4 billion, bolstered by good volume growth in its regional and international businesses.

Headline earnings increased 32.5 percent to R158 million, or 60.4c per share. The company increased operating profit by 30.6 percent to R241 million.

Normalised operating profit, excluding once-off restructuring costs and insurance proceeds, increased by 2.6 percent to R222 million.

RFG received an insurance payout of R4m in March 2022 for the loss of profits during the Covid-19 lockdown in 2020.

Chief executive Pieter Hanekom said: “The group’s performance was impacted by significant input cost inflation, with the largest impact being experienced in cans, meat, oils, and international freight. We have been unable to fully recover the raw material price increases from customers and consumers which has resulted in our margins declining."

RFG’s regional business, which includes South Africa and 13 other countries in sub-Saharan Africa, increased revenue by 15.5 percent.

"Regional long-life foods revenue grew by 16.4 percent with volume growth of 13.4 percent. Fruit juice and dry foods continued to deliver strong growth which contributed to increased market share in these highly competitive categories," it said.

RFG said regional fresh foods turnover increased by 14.1 percent. Ready meals continued to prove resilient in the weak consumer spending environment and achieved good volume growth. While pie sales continued to recover, meat price inflation and increased competitor activity placed pressure on margins.

“Strong demand for the group’s canned fruit products contributed to international turnover increasing by 53.0 percent as export volumes grew by 32.7 percent,” RFG said.

During the first half of the year, RFG completed the acquisition of the Today pie business from Pioneer Foods for R53.7m, including inventory, of R43.3m.

Hanekom said the acquisition complemented RFG’s growing pies and pastries offering and provides access to the top-end retail channel with well-known brands Today and Mama’s, expanding the group’s presence in the pie market.

"The Today business has been relocated from Atlantis in the Western Cape to RFG’s pie production facilities in Gauteng, and the group incurred once-off restructuring costs of R24 million," he said.

Looking ahead, Hanekom said, for the second half of the financial year, the group aimed to continue to drive organic growth to further expand its brand shares, while the sales momentum into the rest of Africa was expected to be maintained.

“Our ongoing focus is on recovering increased input costs from the market and generating operating efficiencies to counter the impact of cost pressure on margins," he said.

He said international demand for RFG’s canned fruit products remained strong. The group continued to diversify its international sales and expand into new markets despite the current global shipping challenges.

“RFG is investing in renewable energy infrastructure to reduce the impact of loadshedding on the group’s production facilities, with solar installations planned for a further two sites in the months ahead,” Hanekom said.

BUSINESS REPORT