Groot Drakenstein – Rhodes Food Group Holdings (JSE: RFG) today reported growth of 15.9% in headline earnings to R126 million for the six months to March 2017.
The Western Cape-based food producer, which owns a growing portfolio of market leading brands including Rhodes, Bull Brand, Magpie, Squish and Bisto, increased group turnover by 8.2% to R2.2 billion. Operating profit was 11.8% higher at R208 million as the group operating margin expanded by 30 basis points to 9.7%.
Chief executive officer Bruce Henderson said regional sales, which includes South Africa and the rest of Africa, increased by 17.9%. “Our fresh foods division grew sales by 27.8% with excellent growth in pies and snacking. Sales in the long life foods division increased by 12.3% despite the tougher trading environment both domestically and in other African markets,” he said.
RFG’s brands gained market share in all key product categories. The Rhodes brand is the country’s market leader in canned pineapple, tomato paste and jam in glass jars, with strong number two positions in canned fruit, canned jams, canned vegetables and canned tomatoes. Bull Brand is the market leader in corned meat.
International sales declined by 20.7% owing mainly to the 11% strengthening of the Rand against the group’s basket of trading currencies. Export volumes were lower largely as a consequence of timing and are expected to normalise over the full 12 months.
RFG recently completed its two largest acquisitions with the purchase of Durban-based food manufacturer Pakco for R197 million and KwaZulu-Natal pie producer Ma Baker for R193 million.
“Pakco has a portfolio of strong brands including the iconic Bisto brand, Southern Coating, Hinds, Trotters and Gold Dish, and the acquisition will enable RFG to enter the dry packed foods market.
“Ma Baker is the market leading pie brand in KwaZulu-Natal. The acquisition will strengthen our position in the growing pie and pastry market and create synergies with RFG’s pie, snacking and bakery businesses. The integration programmes for both Pakco and Ma Baker are progressing well,” said Henderson.
RFG owns 15 production facilities across South Africa and Swaziland. Over R230 million was invested in upgrading production capacity and efficiency in the past six months. This included the completion of its meat production plant upgrade, increasing production capacity at its fruit juice, fruit products, vegetable and pie facilities, and the completion of the construction of a baby food and flexible packaging factory adjacent to its head office at Groot Drakenstein.
Capital investment of R220 million is planned for the second half of 2017, including the upgrading of production facilities at newly acquired Pakco and Ma Baker.
On the outlook for the remainder of the financial year, Henderson said RFG aims to maintain its strong growth momentum by driving organic growth, achieving synergies from the recent acquisitions, growing brand shares and expanding its presence in sub-Saharan Africa.
“Our focus in the international segment is on growing sales to reverse the slower volume growth in the first half, while the volatile Rand exchange rate continues to be a risk to our performance,” he said.
Henderson said RFG is committed to achieving its medium-term margin targets which should ensure sustained growth in returns to shareholders.
Issued by Tier 1 Investor Relations on behalf of Rhodes Food Group
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