Food producer RFG, which has three solar systems at its factories, commissioned another seven solar installations at its manufacturing facilities to reduce its reliance on Eskom.
The company is spending R2m a week to run its generators at high levels of load-shedding, but said it runs them at 90% capacity rather than preferred 60%.
The owner of Bull Brand canned meat, Rhodes canned fruit and vegetables, Today pastries, Hinds Spices and Bisto gravy powder is not paying for the solar power plants upfront, but rather has a power purchase agreement with the company installing them.
The three installations include one at its meat processing plant in Krugersdorp and another at its vegetable facility in Limpopo, with four coming online in the next six months and another three next year.
It started installing generator capacity at its factories seven years ago so they can run during load-shedding.
Spending on diesel for these generators came to R37.8m in its half-year to April 2 as continuing problems at state-owned power utility Eskom led to worse power cuts during the reporting period.
It is also investing use of battery power at its fruit juice site, and will see if this project is successful enough to roll out further.
Eskom announced recently there would be stage 8 load-shedding through the winter, which will make it more expensive for food produces and retailers to produce and keep food cold.
RFG’s interim profit leapt more than a third despite lower sales as high inflation and rate hikes ate into consumers’ disposable income.
“While inflation has started to ease from the heights of the 2022 financial year, we are still experiencing pressure from higher packaging and raw material costs,” CEO Pieter Hanekom said in the results for the six months to April 2.
The company, valued at R2.26bn on the JSE, reported that profit rose 36.7% year on year to R218.05m after group revenue improved 10.2% to R3.8bn, driven partly by price inflation of 14.8%. But as customers adapt to the tough economic environment volumes fell 8.5%.
Producers face a tough balancing act in deciding how much to increase prices when input costs rise as they know they will sell less, but must recoup additional spend. SA consumers buy less food when prices rise.
In his presentation, Hanekom said: “I think we did a good job to get the balance right.”
Fruit juice was the key driver of revenue growth. Dry foods and meat also did well despite significant price increases. Volume in canned fruit and vegetable categories remains under pressure.
“In the regional segment [SA and the rest of Africa], the primary focus has been on improving the operating margin through an effective balance of price and volume, while being conscious of price increases negatively impacting volumes due to the financial pressure facing consumers,” the company said.
Headline earnings per share (Heps), a common profit measure in SA that excludes certain items, grew by a similar margin to 83.2c, amounting to R216.8m. Operating profit rose 43.2% to R345.8m.
Hanekom called the improvement in RFG’s operating profit margin from 6.3% to 8.9% “excellent progress”, and said it was getting closer to its target of 10%.
Opportune Investment’s Chris Logan said the results and margin growth were an improvement, but RFG still had to work hard to improve its business as its share price was below its opening price of R12 when it listed in 2014.
The share price fell nearly 50% in the past five years. It gained 1.18% to close at R8.60 on Wednesday.
Looking ahead, RFG expects volume in the regional business, covering SA and the rest of Africa, to remain under pressure.
Update: May 24 2023
This story has been updated with new information and comment.
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