JOHANNESBURG – JSE-listed Rhodes Food Group saw its share price tumble down more than 18 percent yesterday morning after it sounded a profit warning. Its share price later recovered to close 10.43 percent lower at R16.48 on the JSE.
Rhodes warned in its trading statement that it expected headline earnings for the year to September, 2018 to be between 28 percent and 38 percent lower than the R237 million reported for the previous year.
The group cited interest payments, increasingly challenging local economic environment and the prolonged drought in the Western Cape as having an adverse effect on its regional and international performance.
“Trading conditions showed a marked deterioration in the second half of the group’s financial year, as declining consumer disposable income resulted in a sharp slowdown in sales growth, in line with the pressure being experienced in the food retail sector,” it said of its South African and Continental environment.
Rhodes was slightly more optimistic about its international transactions, but only just.
“International revenue will show an increase for the year due to improving export volumes. Industrial purée and concentrate pricing has remained weak and margins continued to be impacted by increased canned fruit product costs as a result of the drought in the Western Cape over the last two seasons,” it said.
Rhodes said the higher canned fruit costs could not be recovered through price increases and this together with the currency impact has had a material impact on profitability, which would contribute to the international segment posting a loss for the year.
It lamented that in addition to the trading performance, the group's earnings would be adversely impacted by increased interest payments, which were expected to be between R26m and R28m higher than the previous year.
The interest payments mainly related to the funding for the acquisition of Ma Baker, an increased capital programme and lower levels of cash generated as a result of the lower profit over the past year.
– BUSINESS REPORT