RFG Holdings overcame weak consumer spending to lift headline earnings 20.7% to R262 million in the six months to end-March 2024 after it gained market share and expanded its regional and international operating profit margins.
The Western Cape-based food producer, which owns well-known brands such as Rhodes, Bull Brand, Magpie, Squish, Hinds and Today, increased operating profit 15.2% to R399m as the operating profit margin improved by 100 basis points to 10.2%, exceeding their medium-term target.
CEO Pieter Hanekom said in a statement that revenue increased 3.2% to R3.9 billion even as sales volumes fell due to the constrained consumer spending environment.
“Revenue growth was mainly driven by price inflation of 6.9% through the recovery of higher input costs,” he said.
Despite the pressure on volumes, the group focused on revenue management, recovering inflationary cost increases and maximising efficiencies, he said.
Regional revenue, covering South Africa and the rest of Africa, increased 5.8%, with long-life foods revenue growing by 7.5% and fresh foods revenue by 2.9%.
“Our three largest long-life product categories of fruit juice, meat products and dry foods delivered good growth, supported by improved performances in the canned vegetable and bottled salads categories.”
In fresh foods, pie category volumes increased, while the ready meals category benefited from the resilience of higher-income customers.
RFG’s regional operating profit increased 19.7% to R327m. Hanekom said margins were being supported by efficiency gains from recent capital investment, notably new canning equipment and capacity expansion at the meat products plant in Krugersdorp.
He said RFG recorded market and brand share gains in several key product categories. Rhodes was now the number one brand in the jam category. The group’s brands were the market leaders in jam, canned meat, canned tomato and frozen pies and pastry, and held the number two positions in fruit juice, canned fruit, canned vegetables, baby food and spices, herbs and pepper.
International revenue, which accounts for 16% of group revenue, declined by 8.6% due to softer international pricing and lower export volumes, which was compounded by the challenges at the Cape Town port. These impacts were partially offset by foreign exchange gains.
Hanekom said he expected consumer demand to remain constrained due to inflationary pressure on consumers, while interest rates were now only expected to start declining in the 2025 financial year.
He expected that consumer spending might be further impacted by recent commodity price increases and renewed load shedding could further dampen consumer confidence.
“In this environment we aim to drive sales and brand share growth through an increased focus on product innovation, including entering the fruit juice nectar market following the success of the Rhodes brand in the 100% fruit juice market.”
He said customer demand for RFG’s canned fruit products in the international market was strong.
BUSINESS REPORT