RFG Earnings Up 35% On Resilient Trading Performance

Groot Drakenstein – RFG Holdings increased headline earnings by 35.3% to R488 million for the year to September 2023 as the group expanded its regional and international profit margins, generated strong cash flows and significantly improved its debt position.


The group’s final dividend was increased by 35.4% to 62.0 cents per share.


The Western-Cape based food producer, which owns market-leading brands Rhodes, Bull Brand, Magpie, Squish, Hinds and Today, increased group operating profit by 32.0% to R757 million as the operating profit margin improved by 170 basis points to 9.6%.


Cash flows increased by 59.8% to R1.1 billion which enabled the group to reduce its net debt by R371 million to R727 million at year end. The net debt-to-equity ratio improved to 21.3% from 36.2%.


CEO Pieter Hanekom said total revenue increased by 8.7% to R7.9 billion, with growth being driven by price inflation of 12.9% as the group continued to recover the high input cost increases of the past two years. Constrained consumer spending and the low economic growth environment contributed to volume pressure in certain product categories, he said.


Regional revenue, covering South Africa and the rest of Africa, increased by 9.8%, with fresh foods revenue growing 8.1% and long life foods by 10.9%.


The pie category was the standout performer, delivering robust turnover and profit growth. “This was supported by the sustained performance of the Today business acquired last year and the benefit of the integration and consolidation of our pie facilities over the past two years.”


Fruit juice and dry foods recorded double-digit revenue growth, while meat products showed an encouraging recovery in the second half of the year. RFG’s long life products are sold into 13 other African countries and revenue from these territories collectively grew by 12.6% to R466 million.


RFG’s regional operating profit increased by 63.0% to R527 million as the operating margin expanded by 290 basis points to 8.8%. Hanekom attributed the increase to the successful recovery of high input costs in most product categories, efficiency gains at the manufacturing facilities due to effective capital expenditure as well as the strong performance from the pie category.


RFG maintained its market share positions in core product categories. The Rhodes brand is the country’s market leader in canned tomato and the number two brand in fruit juice, canned fruit, canned vegetables, jam and infant food. Bull Brand is the market leader in corned meat and Today is the leading brand in retail frozen pies and puff pastry.


International revenue, which accounts for 24% of the group’s total revenue, grew by 5.3%. Strong international selling prices and the tailwinds from the weaker Rand were offset by a 13.6% volume decline after production volumes returned to historical levels. The international operating profit increased by 17.0% to R245 million as the operating margin strengthened from 11.7% to 13.0%.


RFG has 14 production facilities across South African and Eswatini and invested R288 million in capacity expansion over the past year. RFG’s renewable energy programme has been accelerated in response to the sustained levels of load shedding. By year end the group had solar power solutions at seven production facilities and a further four solar installations are planned for 2024.


On the outlook for the group’s regional business for the year ahead, Hanekom said sales volumes will remain under pressure due to constrained consumer spending and the weak economic environment. Management will continue to focus on recovering costs and factory efficiencies to sustain the operating margin, he said.


“On the international business, we expect current pricing levels and global demand for RFG’s canned fruit products to be maintained. We are therefore confident of sustaining an international operating margin of at least 10% through- the-cycle,” he said.


RFG is planning capital investment of R280 million for the new financial year, including capacity expansion and new equipment at the Tulbagh fruit products and Krugersdorp meat products factories, new and replacement generators and the annual replacement of pineapple plantations in Eswatini.


Issued by Tier 1 Investor Relations on behalf of RFG Holdings

For further information contact Graeme Lillie
Tier 1 Investor Relations
082 468 1507