SOUTH AFRICA – RFG Holdings, South Africa’s canned fruit, and vegetables to frozen pies, infant meals, and spices maker, has announced it will take further pricing initiatives to recover high input costs.
The food manufacturing company has also committed to carrying on with a program of installing alternative energy sources at its plants to counter the country’s load-shedding, or power outages.
Reporting its annual results for the year ended 1 October, RFG recorded an 8.7% year-on-year increase in revenue to R7.9 billion (USD 421.10 million) with that growth being driven by pricing of 12.9%.
Speaking to analysts to discuss the results, CEO Pieter Hanekom said: “We will continue to focus on input-cost recovery to sustain margins.”
The company said that while input-cost increases have moderated in most categories, tinned cans, and paper packaging costs remain high.
RFG, which saw its operating profit increase by 32% to R757 million (USD 50.81 million), admitted that lower consumer spending and competitor promotional activity resulted in volume pressure in certain product categories as total group volumes declined by 8.3% year-on-year.
Hanekom said the “low economic growth environment” continued to put pressure on volumes.
The company exports its products around the world with North America and Europe being amongst its major markets.
International revenues were up 5.3% compared to last year because of “strong international selling prices and the tailwinds from the weaker rand” but were offset by a 13.6% volume decline.
Export shipments were hampered by congestion at the Cape Town port. The port delay is currently averaging 12 to 16 days. Replying to an analyst’s question on the issue, Hanekom said, “Products are being shipped but a bit later”.
Like all South African manufacturers, RFG has had to cope with regular power outages in the country, and to deal with this it has “invested extensively” in back-up power generation over the past seven years.
There is, thus, an additional R25 million (USD 1.68 million) spent on new and replacement generators in the reporting period. Diesel costs to operate generators totaled R65.7 million (USD 4.41 million) for the year.
South Africa’s agriculture sector is currently on the receiving end of the harsh impacts of the uncertain recurrent power cuts in the country.
The detrimental effects of load-shedding extend far beyond power disruptions, denting South Africa’s GDP by an estimated daily range of R204 million (USD 13.68 million) to R899 million (USD 60.23).
The Reserve Bank underscores its far-reaching consequences, outlining its detrimental effects on mining, transportation, storage, manufacturing, forestry, fisheries, and notably, agriculture.
“The strain of stage 4 and higher load-shedding hits hard, especially affecting irrigation and cooling systems,” warns the agricultural sector.
Plans for the year-end introduction of Kusile units 1 to 5, potentially adding 4,000 MW, however, offer a glimmer of hope.
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