Nompumelelo Magwaza
THE NET proceeds raised from the listing of Rhodes Food on the JSE would be used to expand the capacity of its production facilities, reduce debt and accelerate growth through acquisitions, chief executive Bruce Henderson said yesterday.
Rhodes released its first full-year results since listing on the JSE last month. Its operating profit showed an increase of 47.9 percent to R236 million. Turnover for the period rose 31.5 percent to R2.4 billion with normalised headline earnings a share up 40.5 percent to 36.8 cents. Operating margin grew from 8.6 percent to 9.7 percent.
Rhodes is the producer of convenience meal solutions in fresh, frozen and long-life products such as Rhodes canned brand, Bull Brand, Hazeldene, Magpie and Portobello.
The group spent R88m in upgrading its production facilities and expanding capacity. It plans to spend a further R129m next year. This will include increasing the warehouse capacity at its fruit production facilities in Tulbagh and Swaziland, the Bull Brand plant and its pie production facility.
“The business has proven resilient in the current constrained consumer environment owing to the strength of its brands, its exposure to higher LSM customers who have been less impacted than the middle market income groups, and its well established international customer base,” Rhodes said in a statement.
Henderson said it was happy about the listing, which showed it had a strong foundation prior to listing.
“We are planning to use those proceeds to restructure our balance sheet and pay our expensive debt, we will also continue with our capex (capital expenditure) plan on production facility upgrading and we are also looking for strategic acquisition opportunities,” Henderson said.
He added that Rhodes had a handful of targets in mind for acquisition, which were being cultivated and in a position for more meaningful agreements.
Henderson was not so concerned about the unavailability of viable value-added branded acquisitions, saying Rhodes had a history of buying difficult businesses and turning them around. “We do not look out for acquisitions with massive brands and history of profitability,” he said.
He cited Bull Brand as a good example, saying the iconic brand had been neglected together with its production facility, which needed investments.
Henderson said despite tough trading conditions, all economic groups were looking for convenient meals.
“We have demonstrated a good track record of compounded ongoing growth, however, relative to the other competitors in the food manufacturing sector, we are a small player but we have a good track record of continuous growth and have a long way to go in that regard.”
The group’s regional operations, which include South Africa and sub-Saharan countries, increased turnover by 37 percent to R1.6bn. The international export business grew turnover by 22.2 percent to R848m and accounted for 35 percent of the group’s sales.
Jean Pierre Verster at 36ONE Asset Management thought Rhodes’ results were good. However, he said the inclusion of the Bull Brand business for only two months in 2013 compared with the full-year in 2014, “slightly flatters the growth numbers”.
Shares were unchanged at R12.55 yesterday.