Investors punish Rhodes as rand hits sales

Johannesburg – Rhodes Food Group on Tuesday reported growth in domestic markets, but did not fare as well in international markets, due to the stronger rand.

The group’s financial results for the six months to April 2, 2017 show that revenue increased 8% from the previous period in 2016 to R2.2bn. Operating profit increased 11% to R207m. Bottom-line for the period came to R124.6m, up 14.6% from R108.7m. Headline earnings per share increased 7.6% to 53.4c for the period.

The group which operates in South Africa, sub-Saharan Africa and in major global markets, explained that its international revenue was “negatively impacted” by the strengthening of the rand during the period. International turnover declined 20.7% as the rand appreciated by 11%.

“The group also faced pricing pressure in certain major markets. Export volumes were lower largely as a consequence of timing and should normalise over the full 12 months,” said the report.

“The volatile rand exchange rate continues to be a risk to performance of the international segment,” said the group. Rhodes aims to grow sales in international markets to reverse the poor growth in the period.

The share price took a knock, shedding 4.94% to R22.15 just before markets close on the JSE

For the region, revenue increased 17.9%. Regional turnover accounts for 82% of group turnover.

The group saw growth in its fresh food sales, and in pies and snacking products. Revenue for long life foods also grew over the period, despite the tougher domestic and African trade environment. Sales in sub-Saharan Africa, excluding South Africa, increased 55%.

During the period, the group’s acquisition of KwaZulu-Natal based pie producer Ma Baker, for R193m was concluded. The group also acquired spice, condiment and instant meals producer Pakco in March 2017 for R197m. The acquisitions had no impact on the profit for the period under review.

READ: Rhodes Food Group buys R200 million pie maker

Ma Baker will help “strengthen” the group’s position in the pie and pastry market. It will also help diverse the group’s customer base, said the group. 

Rhodes acquired Pakco to enter the dry packed foods market. This is expected to complement the group’s canned food and bottled salad ranges.

ALSO READ: Rhodes Food Group to buy instant food maker

Rhodes reported a cash outflow of R298m. This is partly driven by the outflow of R44m in operating activities and R520m in investing activities.

The group managed to raise R648m through the issuance of 25 million shares in a book building process. The proceeds will go towards funding capital expenditure, the acquisition of Ma Baker, and to reduce debt.

A capital investment of R220m is planned for the remaining half of 2017 and will include the upgrading of facilities at Pakco and Ma Baker. 

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