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October 30, 2017

Rhodes Food issues profit warning after “significant” hit on international business

Rhodes Food Group, the South African producer of condiments to canned food, issued a profit warning after its international business had a "significant adverse'' effect on performance.  

By Dean Best

Rhodes Food Group, the South African producer of condiments to canned food, issued a profit warning after its international business had a “significant adverse” effect on performance.  

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  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
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The company said turnover rose 10.8% in the 12 months to 1 October but it expects headline earnings to decline 17% to 22% from a restated ZAR293m (US$20.8m) a year earlier. Full-year results are due on 21 November. 

A stronger rand, reduced demand for industrial pulp and puree products, foreign pricing pressure mainly in Asia, and increasing costs on canned fruit as a result of the drought in the Western Cape impacted international results, the Groot Drakenstein-based Rhodes explained in a statement today (30 October). Turnover for the international business declined 18.1%. 

The local currency strengthened 10% against a basket of exchange rates during the year, which the company offset through currency hedges in the first half that could not continue in the latter six months. Its operating margin consequently deteriorated.

The listed company, whose brands include those of its namesake, Bull Brand and Pakco’s Bisto, said conditions in the domestic market were challenging but noted “good” organic growth – domestic sales rose 21.4% and organic revenue climbed 12.7%.

Canned fruit export volumes recovered in the second half but were down slightly over the 12 months from a year earlier. Industrial sales of pulp and puree products slowed “significantly” in the latter six months due to a major decrease in global pricing and reduced demand in key international markets. 

Rhodes flagged the risk impact from swings in the rand when it reported six-month earnings in May.

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What’s the forecast for the food and grocery industry?

The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
by GlobalData
Enter your details here to receive your free Report.

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