RFG Holdings, whose products include Bull Brand corned beef, Hinds spices and Bisto gravies, says it is optimistic about healthy local and international demand for its products in coming months amid rising fruit juice and pie sales.
The pandemic weighed on RFG, formerly known as Rhodes Food Group, in its six months to end-March, hitting products such as pies and fruit juices as restrictions kept consumers out of their cars and children from school playgrounds.
CEO Bruce Henderson told Business Day on Wednesday that the group expects a volume improvement in its second half, having secured orders amid a bumper local fruit harvest.
Products such as SA’s canned fruit are considered premium products in Asia and demand remains high, he said, as SA reaps the benefits of a bumper domestic harvest.
“It seems the pandemic and related restrictions have really given canned goods a shot in the arm, not just in SA but globally,” he said. “People seem to want options in their pantries.”
The group has, however, grappled with port congestion, which Henderson said had affected export volumes.
Turnover fell 3.4% to R2.8bn in the six months, with Covid-19 restrictions affecting fruit juices and pies, two of the group’s biggest products.
Profit after tax increased 36.4% to R106.1m, and RFG got a boost from net foreign-exchange gains of R19.6m, from losses of R47.6m previously, and group hedges to limit exposure to currency volatility.
Long-life foods make up 55% of the group’s revenue, with its international division contributing 14% and fresh foods 31%.
Fresh food sales declined 3.6%, with price inflation of 2.2% and volume decline of 5.7%, amid less travel, which affected sales of pies at locations such as petrol stations.
International turnover was 12.6% lower, with volumes down just over a fifth amid logistics challenges, particularly congestion at the Cape Town harbour.
This remains an issue, but RFG has more product and there is more demand for it, said Henderson. “It will be about making sure we maximise the amount of product in the containers that leave Cape Town,” he said.
Another headwind is rising input costs, with SA food producers grappling with a surge in global grain prices. RFG will be looking to protect its margins and pass on costs to the consumer, said Henderson, which will be challenging. The company will also look to protect its market share.
Portfolio manager for Kagiso Asset Management Dirk van Vlaanderen said RFG has delivered a resilient set of first-half results, adding that it has good reason to be optimistic.
Fruit juice and pies are among its more profitable products, said Van Vlaanderen, while pricing has improved in its core Asian markets. A recent restructuring will help with costs.
“At the same time, RFG’s innovation should support continued market share gains in its core categories, helped by the price-conscious consumer looking for its more affordable product offerings,” he said.
Restructuring
RFG, which was founded in 1896 and listed on the JSE in October 2014, incurred one-off retrenchment costs of R14.9m and property writedowns of R16.8m as it moved to consolidate its KwaZulu-Natal and Gauteng pie operations.
The group had said its pie and pastries business in KwaZulu-Natal, formerly known as Ma Baker, would be closed at the end of November. RFG acquired Ma Baker, with facilities in Pinetown and Pietermaritzburg, for R212m in 2016.
The acquisition of Ma Baker, which sells its products to retailers and convenience stores, was supposed to strengthen RFG’s position in the pie and pastry market.
The business has been consolidated into operations in Gauteng, which RFG expects to result in production efficiencies and cost savings, which will benefit it during difficult trading conditions.
After the completion of the restructuring and centralisation of the pie operations, the group expects to realise annual savings of R26m, with savings of R13m expected for the second half of its 2021 financial year. The sale of the KwaZulu-Natal properties is expected to realise about R25m cash in the second half.
RFG’s shares were down 0.65% to R13.76.
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