Rhodes Food Group Profits Up 71% As Sales Pass R4 Billion

Groot Drakenstein – Rhodes Food Group Holdings continued its strong growth momentum and increased turnover by 37% to R4.1 billion in the year to September 2016, as profits grew by 71% to R290 million. Diluted headline earnings per share increased by 70% to 126.5 cps.

The dividend was increased by 70% to 42.2 cents per share.

Chief executive officer Bruce Henderson said the strong sales performance was attributable to continued good organic growth across the regional and international businesses, and the benefit of strategic acquisitions made in the past two years. International revenue was boosted by the depreciation in the Rand.

The group’s operating margin expanded by 160 basis points to 11.9%, with a good recovery in the regional operating margin in the second half of the year.

Regional turnover, which accounted for 73% of group turnover, increased by 43%. The fresh foods division increased sales by 27%, with particularly good growth in the pie category. Sales in the long life foods division increased by 57% with juice and canned meat being the best performing categories.

Rhodes operates in 12 other sub-Saharan African countries where sales increased by 67%, with strong performances from juice and canned meat.

International turnover increased by 23% as the Rand depreciated by 17% in value against the group’s basket of trading currencies over the past year.

The Cape-based food producer increased market share across key product categories, driven by increased marketing, product development and innovation.

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.

The acquisitions of Deemster, General Mills and Alibaba Foods have been successfully integrated into the group’s operations. The acquisitions made over the past two years contributed revenue of R651 million in the past year. “These businesses have accelerated our entry into new product categories of fruit juice, baby food, bottled pickles and salads, bakery and snacking products,” he said.

Shortly after the September year end the group announced its two largest acquisitions to date. Durban-based Pakco, which produces spices, condiments and instant meals, was acquired for R200 million and KwaZulu-Natal based pie producer Ma Baker was bought for R212 million. Both acquisitions are subject to due diligence and competition approval.

“Pakco has a portfolio of strong brands including the iconic Bisto brand, Southern Coating, Hinds, Trotters and Gold Dish, and the acquisition will enable Rhodes to enter the dry packed foods market. Ma Baker will strengthen the group’s position in the growing pie and pastry market,” he said.

Rhodes has made eight acquisitions totaling R900 million since listing in 2014.

Capital expenditure of R229 million was invested mainly in upgrading the Bull Brand production plant, increasing capacity at the fruit juice and fruit products factories, and starting the construction of a new baby food production facility.

The group plans to increase expenditure to R250 million in 2017 for the continued upgrading of production capacity and efficiency at its meat, fruit juice, fruit products and vegetable canning plants, as well as completing the baby food factory.

On the outlook for the 2017 financial year, Henderson said the group aims to maintain its strong sales momentum by driving organic growth, growing brand shares, continuing to expand its presence in sub-Saharan Africa and focusing on the private label ranges which it packs for major retailers.

“We will continue to follow our strategy of complementing organic growth by acquiring food producers in aligned product categories. The integration of the Pakco and Ma Baker acquisitions are a priority and present strong growth opportunities in future years. At the same time we will continue to extract benefits from the other recent acquisitions through new and expanded ranges, and product innovation,” he added.

Ends
Issued by Tier 1 Investor Relations on behalf of Rhodes Food Group Holdings
For further information kindly contact
Graeme Lillie
Tier 1 Investor Relations
082 468 1507