The firm’s operating margin in the year under review declined from 8.9 to 6.1 percent.
The company said its regional operating margin reduced from 9.7 percent to 7.8 percent, impacted primarily by the performance of Ma Baker and by margin dilution owing to higher raw material costs not being matched by price increases in the market.
Rhodes chief executive Bruce Henderson said the turnaround in the performance of Ma Baker was a priority and was progressing well.
“The Ma Baker turnaround has been slower than expected, but good progress is being made to restore the profitability of the business,” Henderson said.
Rhodes in 2016 bought KwaZulu-Natal-based producer Ma Baker for R212m as it sought to strengthen its position in the pie and pastry market.
The group, which owns brands such as Bull Brand, Magpie and Squish at the time said the deal was its largest acquisition since listing on the JSE in 2014.
The company said its operating cost growth, excluding Pakco and Ma Baker, was contained to 6.3 percent for the year, with growth of only 3.2 percent in the second half as the group heightened its focus on cost reduction.
The company further said its gross profit margin was lower at 24.9 percent from 27 percent. Rhodes attributed this decline to deflation in the international business, weak industrial pulp prices, an inability to pass on cost increases to consumers and lower margins in the Ma Baker business.
The group has set aside R200m in capital investment for the 2019 financial year. It said the three remaining major capital projects were scheduled for completion in the first quarter of the new year.
Henderson said the management aimed to realise benefits from the recently and soon to be completed capital projects, which were expected to start yielding returns on capital that was invested over the last two years.
“After the financial year-end the group entered into an agreement to purchase the protein snack business from RCL Foods Consumer Proprietary Limited for R30 million, subject to regulatory approvals,” Henderson said.
“The business produces protein snack foods for Woolworths and will be integrated into RFG’s ready meals operation in Groot Drakenstein. The effective date of the transaction is expected to be April 1, 2019.”
Rhodes Food Group shares gained 3.2 percent on the JSE on Monday to close at R15.48.