RFG turns on profit juices

Canned products are pictured, 23 May 2019, in Benmore, Johannesburg. Picture: Alaister Russell/The Sunday Times
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RFG, the Groot Drakenstein-based food and beverages group, started to restore the bulk of its profit ingredients in the six months to end March despite the lingering effects of the Covid-19 disruptions on its key juice and pies businesses.

The outlook for the second half looks more appetising – although executives make it clear that the lingering effects of Covid-19 remain a concern.

RFG produces fresh, frozen and long life convenience meal solutions for consumers across South Africa, sub-Saharan Africa and major global markets. The portfolio of brands includes household names like Rhodes, Bull Brand, Magpie, Squish, Bisto, Hinds and Pakco. The group also provides private label product ranges packed for all major South African retailers and some international customers too.

The solid interim showing seems to have prompted RFG to loosen its purse strings. Capital expenditure of R250 million is planned for the full financial year – most notably the completion of the additional fruit juice line and the bakery upgrade as well as building of a new warehouse at the fruit juice facility in Wellington.

Perhaps, more importantly, Henderson admitted management continued to evaluate opportunities for strategic, bolt-on acquisitions which are aligned to the group’s core product categories.

For the record, RFG’s interim turnover declined by 3.4% to R2.8 billion. Turnover in the regional segment (South Africa and the rest of Africa) was 1.7% lower, reflecting the impact of the additional Covid-19 restrictions imposed during the second wave of the pandemic over the festive season.

CEO Bruce Henderson said that after increasing by 3.2% for the first five months of the interim reporting period, long life foods turnover reduced by 0.5% for the six months as volumes declined by 8.7%. He said the slowdown was due to sales for March 2021 declining by 13.4% over March 2020 when sales were driven by strong customer demand and panic buying ahead of the national lockdown.

RFG’s dry foods performed well following the successful relaunch of the Hinds spices range. But Henderson said this growth was offset by the slowdown in fruit juice sales owing to restrictions on entertainment and leisure activities during the summer holidays season as well as the delayed start of the school year in 2021.

Long life foods sales into the rest of Africa grew by a a vibrant 11.1%, driven mainly by the dry foods and canned meat categories. But fresh foods sales declined by 3.6%, with price inflation of 2.2% and volume decline of 5.7%.

Henderson said the pie and bakery categories were adversely impacted by the reduced travel over the festive season, which in turn resulted in a slowdown in convenience and forecourt traffic.

International turnover was 12.6% lower. Henderson said export volumes declined by 20.7% due to global logistical challenges – particularly congestion at the Cape Town harbour, which had a significantly adverse impact on exports in March. However, he indicated that customer demand remains strong and that management was confident that volumes would recover in the second half despite the ongoing port congestion.

The good news, though, was that RFG managed to push up operating profit almost 15% to R185 million with the all-important profit margin increasing from 5.5% to 6.5%.

Henderson added that the regional SA and sub Saharan Africa) operating profit crept up to 8.9% (previously 8.3%).

RFG’s international segment – which reported a loss of R44 million in the first half of 2020 – recovered to a break even point in the six months to end March 2021.

He expected RFG to increase brand share and maintain the growth momentum in the dry foods category. “However, the rising Covid-19 infection rate in the country, together with the slow pace of the vaccination roll-out programme, increases the potential for a third wave of infections in the weeks and months ahead.”

But there are some locked in gains. RFG expects to save up to R26 million of annual savings following the completion of the restructuring and centralisation of its pie operations.  What’s more the sale of properties is expected to realise around R25 million cash in the second half.


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