Shares of RFG Holdings, whose products include Bull Brand corned beef, Hinds spices and Bisto gravies, were on track for their worst day in more than two years on Wednesday, after it warned that it was struggling to fully recover surging input costs.
The group, formerly known as Rhodes Food Group, still expects an up to 35% rise in profit for its 2022 half year, lifted by insurance proceeds, but in afternoon trade on Wednesday its shares were trading 11.78% lower at R11.16.
RFG reported strong sales volume growth in both its regional and international business, but there it has seen significant cost inflation for cans, raw materials such as meat, fats and oils, and logistics, in particular international freight costs.
RFG had received R43.4m from insurers during the period due to lost profits during the pandemic, and expects a 30%-35% improvement from the R119.4m in headline earnings it generated in its prior comparative period.
The group had also incurred one-off costs of R23.6m related to its acquisition of Today Pies in its six months to April 3, including restructuring, relocation and severance costs.
Normalised diluted headline earnings per share, which excludes restructuring costs and the effect of the insurance proceeds, is expected to rise between 1% and 6%, the group said.
The group said it had been unable to recover the full extent of these input cost increases, which have adversely hit the operating profit margin of the regional segment. The operating profit for the international segment has recovered after a weak performance in the prior period.
RFG’s international business includes canned fruit exports, and accounted for 19% of revenue in its 2021 year.
Export volumes had fallen more than a fifth in the first half of the year, hit by congestion at the Cape Town harbour, but had shown recovery in the second half.
In afternoon trade on Wednesday, RFG’s shares were on track for their worst day since March 2020, when the local market was digesting the implications of SA’s first hard lockdown.
RFG’s shares have fallen 9.12% so far in 2022, and by just more than a quarter since the start of 2020.
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