RFG Holdings’ sales volumes in its regional business were expected to remain under pressure in the year ahead due to constrained consumer spending, directors of the group said yesterday.
The producer of fresh, frozen and long-life meal solutions, with well-known South African brands that include Rhodes, Bull Brand and Hinds Spices, said yesterday that earnings per share increased by a very credible 35.4% to 185.9 cents in its year to October 1 and the dividend was raised by the same percentage to 62 cents.
Looking forward to the new financial year, CEO Pieter Hanekom and chief financial officer Tiaan Schoombie said management focus would continue to be on price, volume and margin improvement from the branded convenience foods.
“While inflationary input cost increases have moderated in most categories, tinned can and paper packaging costs, in particular, remain high,” they said.
International pricing and demand for RFG's canned fruit products were stable, and the group was confident of an international operating margin of at least 10%.
Capital expenditure of R280m was planned, including to upgrade equipment at the Tulbagh fruit products factory, replace canning equipment and capacity expansion at the meat products factory in Krugersdorp, new and replacement generators and R40m for the annual replacement of pineapple plantations in Eswatini.
Four more solar projects were planned for the 2024 financial year.
Over the past year group revenue increased 8.7% to R7.9 billion due to price inflation of 12.9% as high input cost increases of the past two years continued to be recovered.
After increasing by 10% for the first 11 months of the year, revenue for September was 1.8% lower due to the strong base effect from September 2022, when revenue grew by 28.7% for the month.
“Slower consumer spending and competitor promotional activity resulted in volume pressure in certain product categories as total group volumes declined by 8.3%.”
The impact of the volume declines was partially offset by foreign exchange gains, which contributed 3.4% to revenue growth and acquisitive growth of 0.9% from the Today acquisition,’ Hanekom and Schoombie said.
The rate of volume decline had slowed as the year progressed, with regional volumes down 6.6% for the full year, after declining by 8% for the first half.
Revenue in the regional segment increased 9.8%, with fresh foods revenue rising by 8.1% and long-life foods by 10.9%.
The pie category saw robust turnover and profitability growth, supported by a sustained performance of the Today acquisition, and the benefit of the integration of the pie facilities over two years.
In long-life foods, the fruit juice and dry foods categories recorded double-digit revenue growth, while the meat products category showed an encouraging recovery in the second half.
Industrial pulps and purees delivered good growth in the regional market.
Volumes in the canned fruit and vegetable categories remained under pressure from weaker consumer demand, high raw material and packaging costs as well as the competitive environment.
International revenue grew by 5.3%. Strong international selling prices and the tailwinds from the weaker Rand were offset by a 13.6% volume decline after production volumes returned to historical levels.
Export shipments were hampered by extreme winter weather conditions, particularly in September, as well as low productivity and congestion at the Cape Town port.
Diesel costs to operate generators came to R65.7m for the year.
Regional’s operating profit increased by 63% to R527.1m.
Operating profit for the international segment increased 17% to R244.6m.
BUSINESS REPORT