Rhodes Food Group Holdings (RFG) has upped its dividend by 79.2% after the food producer reported strong earnings growth for the year to September. Picture: Supplied
Rhodes Food Group Holdings’ (RFG) strong performance of its regional business and gains from capital investments saw it increase headline earnings by 18.2% to R577 million in the year to September 30, while the dividend was up 79.2%.
The share price increased sharply at the release of the results, and RFG’s share was trading 6.7% higher at R17.60 on the JSE yesterday afternoon, bringing the price’s gain over 12 months to 37.8%.
Regional operating profit for the Western Cape-based food producer increased by 28.1% to R675m as the operating profit margin expanded to 10.6% from 8.8%. Margins benefited from production efficiencies from recent capital investment, including new canning equipment and expansion at the meat products plant in Krugersdorp.
“Regional revenue increased by 5.9% to R6.4 billion, with sales volumes recovering strongly in the second half as consumer confidence started to improve in the country. Long life foods revenue grew by 6.5% and fresh foods revenue by 4.9%,” CEO Pieter Hanekom said in a statement.
The board increased the dividend payout ratio to shareholders from 33.3% to 50% of headline earnings, based on the sustained profit and earnings growth. The dividend was increased by 79.2% to 111.1 cents a share.
RFG invested R324m in its production facilities across South Africa and Eswatini during the year, which included equipment replacement and upgrades as well as capacity expansion at the Tulbagh fruit products and Krugersdorp meat products factories. Capital investment of R430m was planned for the new year.
The company that owns well-known South African brands such as Rhodes, Bull Brand, Magpie, Squish, Hinds, and Today, increased operating profit by 12.7% to R852m. The operating profit margin improved by 100 basis points to 10.6%, exceeding the medium-term target.
Debt reduced by 37.1%,and the debt-to-equity ratio improving to 11.9% from 21.3%.
Hanekom said their regional segment, covering South Africa and sub-Saharan Africa, delivered resilient revenue growth despite the pressure on consumer spending.
He said revenue was supported by a focus on product and packaging innovation, including the launch of the Rhodes fruit nectar juice range.
The group recorded market and brand share gains in several product categories. The group brands are market leaders in canned meat (Bull Brand), canned tomato (Rhodes), and frozen pies and pastry (Today), and hold the number two brand positions in fruit juice, canned fruit, jam, canned vegetables (all Rhodes), baby food (Squish), and spices, herbs, and pepper (Hinds).
International revenue, which accounts for 20% of the total revenue, fell by 12.5% due to weaker global pricing and demand for canned deciduous fruit. Volumes were also lower due to ongoing shipping delays at the Cape Town and Durban ports.
While the international operating profit margin was 160 basis points lower at 11.4%, it remains within management’s targeted 7.5% to 12.5% range.
On the outlook, Hanekom said lower inflation, declining interest rates, lower fuel prices, and the absence of load shedding were positive for consumer confidence.
“These factors with South Africa’s improved growth prospects are expected to stimulate a recovery in consumer spending in the next 12 to 18 months.” he said.
“In the international business, the equipment programme at the Tulbagh fruit products plant would support further efficiency gains to counteract the headwinds of a stronger exchange rate and lower global pricing.”
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