Shares in RFG Holdings, which owns brands such as Rhodes, Bull Brand, Magpie, Squish, Bisto, Hinds, and Pakco, leapt yesterday after it released a trading update for the 21 weeks ended February 26, saying revenue increased by 7.4%, driven by price inflation of 14.7%.
The shares were up 3.37% at R8.90 in later afternoon trade on the JSE yesterday.
In its trading statement the food group said, “The deteriorating domestic consumer environment and competitor activity created volume pressure in some categories, and overall group volumes declined by 11.0%, which was partially compensated for by 2.5% growth from the Today acquisition," the group said.
Volumes in the regional segment declined by 9.4% - largely in line with the market in comparable categories, it said.
The pie category delivered a strong all-around performance after recovering from the significant sales and margin pressure in the previous financial year due to high levels of inflation and restructuring costs.
“The performance was supported by the turnaround in the Today business following price increases to bring the margin more in line with the rest of the pie category,” RFG Holdings said.
The Today acquisition contributed 3.0% to the growth of the regional segment.
Good sales growth was achieved in three of the key long-life foods categories.
“Fruit juice, the largest long-life category, achieved good volume growth with high double-digit sales growth and this enabled the category to maintain margins. The dry foods and meat categories achieved good sales growth despite price increases during the period,” it said.
Volumes in the canned food categories remained under pressure from weak consumer demand, sustained cost pressures from high raw materials and packaging costs, as well as competitor activity.
However, the canned meat category had started to recover following price increases and stronger sales growth, RFG said.
In the international segment, revenue grew by 0.7% as strong international selling prices and the benefit of the weakening rand were offset by the 18.8% decline in volumes of the high base in 2022 when production was increased to meet the higher global demand following the failure of the Greek peach crop in 2021.
Like other companies in South Africa, the food producer said it was negatively impacted by load shedding.
“Sustained load shedding continues to impact food manufacturers through lower production output, operational inefficiencies, and higher operating costs as well as the availability of certain raw materials due to the impact of load shedding on suppliers,” it said.
In the five months that ended February 2023, RFG’s diesel costs to operate generators totalled R32 million. At current levels of load shedding, the average weekly diesel cost to run generators amounted to approximately R2 million.
“RFG has invested in generators at its 13 production plants in South Africa over the past seven years to ensure that food safety is not compromised through inconsistent electricity supply. At some operations additional generators are currently being installed to meet the increased demand for electricity,” it said.
It said the firm had accelerated its renewable energy infrastructure programme in response to load shedding.
“Solar installations have been completed at two facilities and installations are planned for a further seven sites over the next two years,” RFG said.
Looking ahead, RFG said its management continued to make pleasing progress in recovering higher input costs from customers in most product categories, which had strengthened margins in the regional segment.
“However, the group is still experiencing inflationary pressures from higher packaging, cans and paper, and meat costs in particular,” it said.
Anthony Clark, an independent analyst at Small Talk Daily (@smalltalkdaily) tweeted, “Pretty solid update from mid-cap food business $JSERFH Rhodes Foods Group - all be it coming off a pretty dire like-off-like base. Much of the ‘mess’ been mixed up at past deals & some recovery seen in key segments.”
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