RHODES Food Group Holdings (RFG) today reported a strong turnaround in performance for the year to September 2019 as operating profit increased by 25% and headline earnings by 38%.
The group increased its annual dividend by 37% to 27.9 cents per share.
The Western Cape-based food producer, which owns market-leading brands Rhodes, Bull Brand, Magpie, Squish, Bisto, Hinds and Pakco, grew total sales by 8.5% to R5.4 billion. Sales have grown at a compound rate of 16% per annum since RFG’s listing on the JSE five years ago.
The operating margin improved to 7.2% from 6.3% and the results for the year translated into growth of 38% in diluted headline earnings per share to 83.8 cents.
Chief executive officer Bruce Henderson said the results benefited from robust regional sales, the early signs of recovery in the international business and expanding margins.
Sales of long life foods increased by 9.2%. Good growth was reported in fruit juice, dry foods and canned meat, with baked beans being the fastest growing category.
Fresh foods increased sales by 7.3% with ready meals proving resilient in the consumer downturn and the pie category stable in a highly competitive market.
International sales increased by 8.8% with stronger canned fruit sales, increased exports of fruit snacks in cups and the benefit of the weaker Rand.
Henderson said the protein snack food business acquired from RCL Foods was successfully integrated into RFG’s Western Cape ready meals plant, “with the new business contributing sales of R33 million in the six months since acquisition”. The business produces protein snacks including meat balls and chipolata sausages for Woolworths.
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 fruit, canned pineapple and canned tomato. Rhodes is the number two brand in fruit juice, baby food, jam and canned vegetables. Bull Brand is the market leader in corned meat.
The group owns 15 production facilities across South Africa and Eswatini, and invested R232 million in capital projects during the year. These included the expansion of its Western Cape ready meals production facility, the relocation of its pulps and purees plant from Wellington and the ongoing development of new pineapple plantations in Eswatini. Capital investment of R150 million is planned for the new financial year.
On the outlook for 2020, Henderson said the group expects to maintain the current positive growth momentum, based on the strong turnaround in performance in 2019 and the recovery in the international business.
“While consumer spending is likely to remain under pressure in the weak macroeconomic environment, our regional business will continue to focus on driving organic growth, increasing brand shares and improving margins.”
He said following the good recovery in the international business, the business is well positioned to continue improving profitability in the year ahead. Turnover growth will be supported by expected increases in the export of fruit snacks in cups to the USA and higher canned fruit exports.
“Our priorities for the year ahead include improving our balance sheet by generating stronger cash flows to reduce debt levels, containing costs and continuing to evaluate strategic acquisition opportunities,” he added.