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November 21, 2016

Rhodes Food Group books jump in FY profits

Rhodes Food Group, the South African condiments-to-canned pineapple group, has booked a jump in annual earnings for its 2016 financial year, boosted by increased turnover of 37% to ZAR4.1bn (US$285m) for the 2016 financial year.

Rhodes Food Group, the South African condiments-to-canned pineapple group, has booked a jump in annual earnings for its 2016 financial year, boosted by a 37% jump in turnover.

Rhodes said profits for the year to 25 September grew by 71% to ZAR290m (US$20.4m) and diluted headline earnings per share increased by 70% to 126.5 cents – just shy of the 128.8 to 132.6 cents forecast last week. The dividend was increased by 70% to 42.2 cents per share.

The Cape-based food producer said its operating margin expanded by 160 basis points to 11.9%, “with a good recovery in the regional operating margin in the second half of the year”. The regional segment covers South Africa and the business generated in the rest of Africa, where Rhodes operates in 12 countries.

Turnover stood at  ZAR4.1bn (US$285m). Regional turnover, which accounted for 73% of group turnover, increased by 43%.

Rhodes’ fresh foods division increased sales by 27%, “with particularly good growth in the pie category”, Rhodes said. “Sales in the long life foods division increased by 57% with juice and canned meat being the best performing categories.” Rhodes said sales in 12 other sub-Saharan African countries in which it operates increased by 67%, “with strong performances from juice and canned meat”.

CEO Bruce Henderson said the sales performance was attributable “to continued good organic growth across the regional and international businesses, and the benefit of strategic acquisitions made in the past two years”.

Henderson said international revenue was boosted by the depreciation of the rand. International turnover increased by 23% as the rand depreciated by 17% in value against the group’s basket of trading currencies over the past year.

In addition, Henderson said the group’s acquisitions over the past two years of Deemster, General Mills’ South African unit, which supplies frozen and dry-mix bakery products to the convenience sector and halal baker Alibaba Foods, which “have been successfully integrated into the group’s operations”, contributed revenue of ZAR651m in the past year. “These businesses have accelerated our entry into new product categories of fruit juice, baby food, bottled pickles and salads, bakery and snacking products,” he said. 

After the end of the financial year, Rhodes announced its two largest acquisitions to date. Durban-based Pakco, which produces spices, condiments and instant meals, was acquired for ZAR200m and KwaZulu-Natal-based pie producer Ma Baker was bought for ZAR212m. Both acquisitions are subject to due diligence and competition approval.

Henderson said: “Pakco has a portfolio of strong brands including the iconic Bisto brand, Southern Coating, Hinds, Trotters and Gold Dish, and the acquisition will enable Rhodes to enter the dry packed foods market. Ma Baker will strengthen the group’s position in the growing pie and pastry market.”

During the financial year, capital expenditure of ZAR229m included starting the construction of a new baby food production facility, the group said.

Rhodes said it plans to increase expenditure to ZAR250m in 2017 “for the continued upgrading of production capacity and efficiency at its meat, fruit juice, fruit products and vegetable canning plants”, as well as completing a baby food factory at the group’s Groot Drakenstein facility, which is adjacent to Rhodes’ head office.

A Rhodes spokesperson told just-food the facility is due for completion in the first half of calendar 2017. The factory will be used primarily to produce the Rhodes Squish range of baby foods.

On the outlook for the 2017 financial year, Henderson said the group aims to maintain its “strong sales momentum” by driving organic growth, growing brand shares, continuing to expand its presence in sub-Saharan Africa and focusing on the private-label ranges, which it packs for major retailers.

“We will continue to follow our strategy of complementing organic growth by acquiring food producers in aligned product categories,” Henderson said. “The integration of the Pakco and Ma Baker acquisitions are a priority and present strong growth opportunities in future years. At the same time, we will continue to extract benefits from the other recent acquisitions through new and expanded ranges, and product innovation.”

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