Covid-19 means good news and bad for maker of Bull Brand
Local households are stocking up with long-life foods but exports of tinned fruit to China have fallen off, says Rhodes Food Group
Rhodes Food Group, which makes Bull Brand corned meat and Bisto gravies, says it has seen a spike in demand for canned goods in SA in March due to the coronavirus outbreak.
While it is still too early to determine consumer buying patterns during this period of social isolation, households are stocking up on long-life products such as canned meat and vegetables as well as baby food, the group said.
Rhodes Food Group, which has changed its name to RFG Holdings, said its SA facilities have not been affected by the virus and most have the capacity to increase production at short notice. The company will trade under the new name from April 1.
In a letter to stakeholders on March 19, CEO Bruce Henderson said the group had a “robust” supply chain and had sufficient raw material stock — of between nine and 12 weeks — on imported materials “should our international supply chains be disrupted”.
Henderson said the company, which has a market capitalisation of R262.8m, had taken a number of precautionary measures to curb the spread of Covid-19. These included halting all international travel and limiting local travel to “business-critical” only.
The virus outbreak is weighing on the group’s exports of canned fruit to China, resulting in an 11.3% fall in international volumes since January. International business turnover declined by 1.7%, mainly due to a drop in exports of canned fruit to China since January.
While some of the excess volume of canned fruit earmarked for China was exported to other Asian markets, a significant volume will be placed in alternative markets at lower margins than those typically achieved in China, the group said in a trading update for the five months to end-February. The effect on margins should be partially offset by a weaker currency.
Independent analyst Anthony Clark on Monday said the Covid-19 outbreak was a major setback for the company. “Half of their exports go to Asia. So what is going on in the Asian markets hits them. They have been selling to China at attractive margins. That is why the international business [turnover] fell in the six months,” Clark said.
Group turnover for the five-month period ended February increased 7.6%, with SA and rest of Africa growing turnover 9.3%.
Regional fresh foods turnover increased 15.9%, with the performance driven by strong growth in the ready-meals and pie categories. Rhodes Food Group’s regional segment includes SA and the rest of Africa.
Regional long-life turnover increased by 5.7% and volumes increased by 3.2%. “Fruit and baked beans continue to perform well. Squish baby food, previously in the regional fresh food segment, is being reported in the regional long-life foods segment from October 1 2019.”
Clark said he expected the company’s performance for 2020 to be weak. “I do not expect the second half of the financial year to be great,” he said.