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November 29, 2017

South Africa’s Rhodes Foods ramps up capital investment in consolidation drive

South Africa's Rhodes Food Group plans to invest a further ZAR350m (US$25.5m) this fiscal year to upgrade existing facilities and consolidate operations following its recent acquisitions.

By Dean Best

South Africa’s Rhodes Food Group plans to invest a further ZAR350m (US$25.5m) this fiscal year to upgrade existing facilities and consolidate operations following its recent acquisitions.

As the producer of meat pies to baby food to canned fruit endeavours to increase capacity and production efficiencies, it spent ZAR487m on capital expenditure in the year to 30 September. A Rhodes Food spokesperson told just-food on Tuesday (28 November) that the project funding came from a 25m share offering in November last year, which raised ZAR648m.

Spending for the 2018 fiscal year will be financed through operating cash flow and bank borrowings, the spokesperson added.

The new round of funding will either continue to finance projects that were started last year or those coming on line in the next 12 months, according to a post-earnings presentation after annual profits fell 19% to ZAR237m due to a “significant adverse” effect from its international performance. 

Still, group revenue rose 10.8% to ZAR4.6bn, with regional sales up 21.4% and 47% in the rest of Africa. However, overseas earnings slumped 18% amid a combination of a stronger rand, a drought in the Western Cape that hit the canned fruit business, and a slowdown in pulp and puree products.  

Rhodes Food most recent acquisitions took in food producer Pakco and pie maker Ma Baker in October of last year, and Alibaba Foods Holdings in February 2016, a maker of eastern delicacies. The former produces a range of branded and private-label spices, condiments and instant meals, including the Bisto brand.

Adding to the list of the past seven years or so, are Bull Brand Foods in 2013, the fruit canning business of Del Monte Fruits at Tulbagh, Western Cape, in 2010, and juice contract packager Pacmor in Wellington.  

As part of the consolidation process, Rhodes Food plans to merge and move its snacking business – formerly that of Alibaba – into its ready-meals segment to be located at Groot Drakenstein, which is undergoing a major revamp to transform the site into a production hub. Manufacturing at the company’s pulps and purees plant at Wellington will also be transferred to the same site.

Both of the affected factories will be closed and employees moved to the new facilities at Groot Drakenstein, the spokesperson confirmed.

Other projects include expanding capacity at the firm’s pie and bakery facilities based in Gauteng, and the installation of clear base juice concentrate plant, also at Groot Drakenstein.

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