RFG’s revenue recovers but power billing issues take toll

Food producer RFG Holdings, whose products include Bull Brand corned beef and Bisto gravies, says strong demand for canned fruit and fruit juice ensured it ended its 2021 year with revenue growth, though municipal billing issues have weighed on profits.

RFG, formerly Rhodes Food Group, is facing a challenge in passing rising input costs to consumers going into 2022, CEO Pieter Hanekom told Business Day, while port congestion could still be a challenge for the group’s exports over the next 18 months.

RFG managed market share gains in some of its strategic categories, notably fruit juices, which rebounded strongly as lockdown conditions eased. The pandemic has also boosted consumer interest in longer-life goods, said Hanekom, who said the trend of more people cooking at home looks likely to continue.

Group revenue increased 1.5% to R6bn in the group’s year to end-September, having fallen 3.4% in its first half, as stricter lockdown restrictions hampered sales of pies, the snack of choice for many motorists, as well as fruit juice, a staple of school lunch boxes.

The Western Cape-based producer said headline earnings rose 1.4% to R230m, with the group upping its dividend 1% to 29.1c — about a R76.5m payout. In 2019, RFG generated R219.8m in headline earnings, the main profit measure in SA.

Operating profit

Profits came under pressure in 2021 from an abnormal adjustment of R27m for electricity costs, arising from increased power capacity supplied to one of the group’s production hubs, which was upgraded and expanded in its 2019 financial year. RFG said the management had realised in 2021 the group was possibly being undercharged for electricity, and had engaged local authorities on the matter.

The group’s normalised operating profit, excluding impairment and acquisition costs and the adjustment for prior-year utility costs, increased 9% to R419m and the operating profit margin improved by 40 basis points to 7%.

RFG generates just more than half of its revenue from long-life foods, which include fruit juice, 29% from fresh foods such as pies, and just less than a fifth internationally.

The Rhodes brand is the country’s market leader in jams, canned pineapple and canned tomato. Rhodes is the second-largest brand in canned fruit, fruit juice, baby food and canned vegetables. Bull Brand is the market leader in corned meat.

Shipping backlogs

Sales volumes in the international business recovered in the second half due to robust demand for canned fruit products across all the group’s international markets. After reporting a 20.7% decline for the first half of the year, volumes grew 8% in the second half to end the year 3.3% lower, the group said.

Export sales continues to be affected by the shipping backlogs due to the ongoing global logistics challenges and local port congestion, the group said, but demand remains strong.

“We expect export volumes to recover as the shipping backlog reduces over the next 12-18 months,” said Hanekom. “We really did well in difficult circumstances in terms of getting the product out to market.”

By the JSE’s close on Wednesday, RFG’s shares were trading 2.08% lower at R12.25.

The group’s shares have risen 1.4% so far in 2021 and have fallen by about a fifth since the start of 2020.

Update: November 17 2021
This article has been updated with share price information and additional information throughout.

gernetzkyk@businesslive.co.za