Food producer RFG Holdings is the latest company to report issues at harbours, Cape Town in particular, as Transnet’s problems persist.
RFG Holdings brands include Rhodes, Bull Brand, Magpie, Squish, Hinds and Today.
The company, valued at about R3.4bn on the JSE, said on Wednesday in posting results for the year to end-October that its export shipments of canned fruit are bogged down by delays averaging 12-16 days and “shipping lines bypassing the port when it is too costly to dock due to the slower turnaround and waiting time at the port”.
Its exports were also hampered by extreme winter weather conditions, particularly from the devastating storms in the Western Cape in September, and low productivity and congestion at the Cape Town port.
Cape Town is not the only port with problems; Business Day reported earlier in November that delays in Durban port force retailers to fly clothing and shoes into SA at a high cost, damaging SA’s reputation as a reliable trading partner and potentially jeopardising its competitiveness in the global economy.
Shipping group Maersk said last week that it will bypass Cape Town as a port of call on a big Far East route to avoid disruption and spiralling operating costs. Instead it will stop at Port Louis in Mauritius and SA-bound containers will be loaded onto a smaller “feeder service”.
Port challenges are “a big worry for us going forward”, said CEO Pieter Hanekom.
He said there is a lack of planned “maintenance” that leads to unexpected breakdowns.
Cape Town and Durban harbours have reported insufficient machinery to offload containers from ships onto trucks as some is broken.
“I think there’s a big management issue within the port system,” said Hanekom.
RFG’s international segment accounts for almost a quarter of its revenue and about 30% of its operating profit.
Port delays meant RFG exported less. Its international volumes dropped by 13.6%, but this fall was offset by a weaker rand and stronger foreign currency. International revenue therefore grew 5.3%.
Hanekom said canned food producers did not have the same challenges as fresh fruit producers, the products of which are damaged by export delays. Canned goods still reach their foreign market intact.
But when ships are uploading stock after delays, canned goods are placed behind fresh fruit, “at back of the queue”.
Delays in exports reduced RFG’s working capital and affected cash flow management.
The group said persistent load-shedding in summer meant cold storage facilities run by farmers or co-operatives do not refrigerate enough fresh pears before they are canned. This leads to fewer pears available for canning.
But RFG’s manufacturing was not affected as it could run its plants at 100% capacity by using generators. It has invested in other power sources for years.
The group spent R65.7m on diesel in the latest financial year to keep generators running.
RFG also invested in water storage as municipalities run out of water when load-shedding is severe. Some factories can now store two to three days’ water supply.
Despite these challenges, RFG managed to grow its profit.
Revenue rose 8.7% to R7.9bn, but price inflation was 12.9%, meaning the company sold lower volumes.
Food producers often sell less when they put up prices to recover rises in costs. RFG said it would continue to balance a need to lift prices with ensuring that it does not sell too few goods as a result.
“Slower consumer spending and competitor promotional activity resulted in volume pressure in certain product categories as total group volumes declined by 8.3%,” said the company.
Operating profit leapt 32% to R756.2m and the operating profit margin 1.7 percentage points to 9.6%.
Profit rose 31.9% to R477.5m and headline earnings per share (HEPS), a common profit measure in SA that excludes certain items, 35.9% to 187.4c.
The dividend was raised 35.4% to 62c per share.
Update: November 22 2023
This story has been updated with new information throughout.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.