South Africa’s RFG Holdings is consolidating manufacturing with a plan to close a pies and bakery plant by the end of the month amid challenging trading conditions caused by the pandemic.
In its financial results for the year to 27 September, publicly-listed RFG said it will discontinue operations at the factory in the city of Pietermaritzburg, KwaZulu-Natal province formerly owned by Ma Baker, a bakery business the company acquired in 2016.
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Pie production will be switched to another site in Aeroton, Gauteng province, while bakery manufacturing will be transferred to a plant in Linbro Park, also in Gauteng.
In March this year, shareholders approved a change in the company’s listed name to RFG Holdings from Rhodes Food Group. CEO Bruce Henderson explained at the time: “The objective of adopting the name RFG is to create an identity and branding for the holding company which is distinct from the main operating subsidiary, Rhodes Food Group, and the group’s main trading brand Rhodes.”
“This rationalisation will create production efficiencies and cost savings, which will benefit the group in the current difficult trading conditions,” RFG said in a stock-exchange filing with the Johannesburg bourse.
RFG, which also produces branded baby foods, dairy products, ready-meals, canned fruit, juices and spices, as well as products for private-label clients, said it incurred ZAR7m (US$451,483) in charges related to the “rationalisation” of its plants, and an impairment of ZAR9.5m directly related to the Pietermaritzburg property.
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By GlobalDataThe company also incurred ZAR7.6m in costs associated with Covid-19, and booked a foreign-exchange loss of ZAR54.6m for the year due to weakness in the rand.
“Covid-19 will continue to impact the group into the 2021 financial year due to the deteriorating economic conditions in the country and weaker consumer spending, which could be compounded by increasing levels of unemployment,” RFG said.
However, it added: “RFG’s broad range of product categories should continue to provide resilience in this environment, supported by the continuing recovery of the fruit juice and pie categories and the ongoing demand for canned and dry foods and ready meals.”
RFG posted annual turnover of ZAR5.9bn, an increase of 8.3% over the prior year. Operating profit of ZAR392m was in line with the previous 12 months.
EBITDA climbed 10.3% to ZAR625m, while headline earnings were 3.2% higher at ZAR226.7m. After-tax profits were up 0.3% at ZAR216.1m.
Earnings per share were unchanged at 82.7 cents and headline earnings per share increased 3.2% to 86.7 cents.
RFG said it plans to spend ZAR250m in capital investment in the new financial year, including an additional fruit juice production line and warehouse as its factory in Wellington, and also a new “filling line” for baby foods at its plant in Groot Drakenstein. An upgrade of the Linbro Park plant to accommodate the switch in bakery production also features in the spending plans.
just-food has approached RFG for more details on the new filling line and also for further information on its plans for M&A. The stock-exchange filing noted RFG’s “management continues to evaluate opportunities for strategic, bolt-on acquisitions which are aligned to the group’s core product categories”.
