Groot Drakenstein – RFG produced a stronger second half performance in the Covid-19 impacted year to September 2021 as normalised headline earnings increased by 18.0% to R253 million.
The group’s normalised operating profit, excluding impairment and acquisition costs and an adjustment for prior year utility costs, increased by 9.0% to R419 million and the operating profit margin improved by 40 basis points to 7.0%.
The Western-Cape based food producer, which owns market-leading brands Rhodes, Bull Brand, Magpie, Squish and Hinds, increased group revenue by 1.5% to R6 billion. Following a decline of 3.4% in the first half, revenue increased by 6.3% in the second six months, driven mainly by the recovery in fruit juice and international canned fruit volumes.
The financial results were impacted by an adjustment for arrear electricity costs since 2019 due to incorrect billings of R27 million at its Groot Drakenstein production hub. This abnormal expense negated the group’s good operational performance and contributed to diluted headline earnings per share and the dividend only increasing by 1.0%.
Pieter Hanekom, who was appointed CEO in October 2021, said the regional performance continued to be impacted by the Covid-19 pandemic, with lockdown restrictions affecting two of the group’s largest product categories of fruit juice and pies mainly in the first half. The second half performance was further impacted by strike action at the group’s ready meals and pie production facility in Gauteng and the civil unrest in KwaZulu-Natal in July 2021.
RFG’s regional segment, which includes South Africa and 16 other countries in sub-Saharan Africa, accounts for 81% of the group’s revenue.
Revenue from long life foods grew by 5.1%. The fruit juice category showed a sustained turnaround and grew volumes by 52.7% for the second half. Long life foods sales into the rest of Africa grew strongly by 11.5%, with good growth in sales of fruit juice, canned meat, canned vegetables and dry foods.
Fresh foods turnover increased by 2.3% as the ready meals and dairy categories continued to prove resilient in the weak consumer spending environment.
The normalised regional operating profit increased by 17.9% to R412 million. The margin increased by 100 basis points to 8.6%, supported by the strong comeback in the juice category. However, inflationary pressures mounted in the second half due to global commodity shortages and firming prices, including tin plate used in food cans, other packaging material and meat.
RFG is South Africa’s leading manufacturer of canned fruit, jams and canned meat. The Rhodes brand is the country’s market leader in jams, canned pineapple and canned tomato. Rhodes is the number two brand in canned fruit, fruit juice, baby food and canned vegetables. Bull Brand is the market leader in corned meat.
Sales volumes in the international business recovered in the second half due to robust demand for canned fruit products across all the group’s international markets. After reporting a 20.7% decline for the first half of the year, volumes grew by 8.0% in the second half to end the year 3.3% lower. Export sales continued to be impacted by the shipping backlogs due to the ongoing global logistics challenges and local port congestion. International revenue declined by 8.2% for the year as a result of the lower volumes and the stronger Rand exchange rate.
On the outlook for the 2022 financial year, Hanekom said the gradual normalisation of the economy and the momentum of the Covid-19 vaccination programme are positive for consumer spending. “We expect this to contribute to stronger organic growth and increased brand shares, while we plan to maintain our current strong sales momentum into the rest of Africa.”
“International demand for the group’s canned fruit products remains strong and exports are being expanded to new markets. We expect export volumes to recover as the shipping backlog reduces over the next 12 to 18 months.”
Hanekom said RFG continues to evaluate opportunities for strategic, bolt-on acquisitions. “Our acquisition of the Today frozen pie business from Pioneer Foods, which will be effective from 1 February 2022, complements the group’s growing pies and pastries offering and provides access to the top end retail channel,” he said.
Issued by Tier 1 Investor Relations on behalf of RFG Holdings
For further information contact
Graeme Lillie, Tier 1 Investor Relations 082 468 1507