Rhodes Food sees drop in prof­its that could reach 22%

The Mercury - - COMPANIES - Ka­belo Khu­malo

RHODES Food fell more than 3.5 per­cent in early trade yes­ter­day af­ter the group an­nounced that it ex­pected prof­its for the year to the end of Oc­to­ber to de­crease by up to 22 per­cent as the Western Cape drought and in­ter­na­tional busi­ness weighed on the bot­tom line.

The com­pany said the drought had pushed up canned fruit costs and im­pacted neg­a­tively on its ex­port vol­umes, while its in­ter­na­tional units un­der­per­formed as a re­sult of the rand strength. Its shares shed 1.06 per­cent to close at R19.69 on the JSE yes­ter­day.

The Western Cape-based food pro­ducer owns brands such as Rhodes, Bull Brand, Mag­pie and Squish.

It said turnover for the pe­riod in­creased 10.8 per­cent com­pared with the sim­i­lar pe­riod last year.

It said its in­ter­na­tional unit also took the fall on the back of pric­ing pres­sures em­a­nat­ing mainly in Asia.

“Canned fruit ex­port vol­umes re­cov­ered in the sec­ond half of the year, but were marginally down year-on-year,” Rhodes said. “The full im­pact of the strength­en­ing cur­rency on the op­er­at­ing mar­gin was lim­ited in the first half by the group’s for­eign ex­change hedg­ing pol­icy. This could not con­tinue in the sec­ond half and the mar­gin de­te­ri­o­rated as a con­se­quence of the stronger rand.”

Last year, the com­pany com­pleted its two largest ac­qui­si­tions, with the pur­chase of Dur­ban-based food man­u­fac­turer Pakco for R197 mil­lion and KwaZulu-Natal pie pro­ducer Ma Baker for R193m.

Pakco owns a port­fo­lio of strong and well-known brands, in­clud­ing the iconic Bisto brand, Hinds, Buf­falo, South­ern Coat­ing, Trot­ters and Gold Dish. Ma Baker pro­duces pies, pas­tries and snack­ing prod­ucts at its man­u­fac­tur­ing fa­cil­i­ties in Pine­town and Pi­eter­mar­itzburg.

The ac­qui­si­tion of Ma Baker marked the eighth ac­qui­si­tion made by Rhodes Food Group since list­ing in 2014, with the ac­qui­si­tions to­talling R900m to date.

The group said head­line earn­ings would de­cline be­tween 17 per­cent and 22 per­cent dur­ing the pe­riod in re­view over the re­stated head­line earn­ings of R293.1m for the prior year.

The com­pany said the drought had pushed up canned fruit costs and im­pacted neg­a­tively on its ex­ports.

It said in­ter­na­tional turnover eased 18.1 per­cent com­pared to the prior year as a re­sult of in­dus­trial sales of pulp and puree prod­ucts which slowed sig­nif­i­cantly in the sec­ond half of the year be­cause of a ma­jor de­cline in global pric­ing and re­duced de­mand in key in­ter­na­tional mar­kets.

How­ever, the group’s re­gional sales, which in­clude the rest of Africa, in­creased 21.4 per­cent, with or­ganic growth of 12.7 per­cent.

“The re­gional per­for­mance ben­e­fited from the ac­qui­si­tions of Pakco and Ma Baker, which have set­tled well and have been con­sol­i­dated for six months in this pe­riod,” it said.

“The group has con­tin­ued to gain mar­ket share in key cat­e­gories, and sales in the rest of Africa con­tinue to show good growth.”

Fa­mous Brands, own­ers of the Mugg & Bean fran­chise, last year ac­quired UK-based Gourmet Burger Kitchen, which has se­verely un­der­per­formed and caused its debts to rise.

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