Rhodes Food tastes first turnover dip in five years
Listed food products firm cites declining economic conditions as squeezing its margins
Rhodes Food Group’s (RFG’s) full-year turnover growth for the SA and the rest of Africa segment looks set to dip to single digits for the first time since the group’s JSE listing in 2014.
In a trading update for the 10 months ended July, the owner of Bull Brand and Bisto brands said the SA and rest of Africa segment, which accounts for 81% of the firm’s 2018 turnover, experienced weak macroeconomic and consumer environment.
RFG’s turnover growth has been losing momentum despite a 43.4% growth in the 2016 financial year. The turnover increased by 21.4% and 11.9% in the 2017 and 2018 financial years, respectively. From 2014-2018 RFG’s compound annual growth rate (CAGR) was 20.2%.
“While the regional business is expected to trade at similar turnover levels in the remaining two months of the financial year, margin expansion is proving challenging in the current macro environment,” RFG said.
In the 10 months, the company, which is scheduled to release the full-year results on November 19, increased international turnover by 13.4%, thanks largely to a weaker rand and exports of fruit snacks to the US. Fresh foods turnover was up by 5.8%. RFG’s regional long-life turnover grew 10.8% with 6.4% volume growth in the 10 months.
Meanwhile, the fall in egg prices and rising feed costs that hit Quantum Foods’s half-year performance looks set to persist for the rest of the year, with the poultry and animal feeds business expecting earnings to slump by at least 42%.
The Western Cape-based company, which is SA’s largest egg producer, on Monday said headline earnings per share were expected to be lower than the 95c per share in the prior comparative period, as egg prices recover from a national egg shortage that followed an outbreak of Avian influenza in 2017.
The group said lower levels of profitability from the eggs business, due to higher feed input costs and a decline in egg prices resulting from an increase in the supply of eggs in the South African market, had affected earnings in the six months.
In the first half of the 2019 financial year, Quantum also bemoaned the falling egg prices. In the six months ended March 31, egg prices declined by 14.1%, while volumes increased by a modest 2.9%. The combination of declining egg prices and increasing input costs put pressure on the company’s margins.
Quantum, however, said it had experienced improved levels of profitability in its feeds business, which benefited from increased volumes. It said profitability had improved in its farming business due to improved production efficiencies.