RFG Holdings, the parent company of popular fruit juice brand Rhodes, recently announced a significant increase in its interim profits for the six months ended April 2023. Despite ongoing challenges posed by load-shedding, RFG Holdings experienced a 36.7% year-on-year growth in profits, amounting to N$218 million. The company attributed this growth to several factors, including price inflation and strong performance in both regional and international markets. This article provides a detailed overview of RFG Holdings’ financial results, factors contributing to its success, challenges faced, and its plans for the future.
Profit Growth and Revenue Increase
RFG Holdings reported a substantial rise in profits, driven by a 10.2% increase in group revenue, reaching N$3.8 billion. The company experienced price inflation of 14.8%, contributing significantly to this growth. The strong trading performance of both the regional and international businesses in March played a vital role in the company’s positive financial results.
Factors Contributing to Growth
Price inflation and market share gains in the fruit juice category were the primary drivers of revenue growth for RFG Holdings. The company’s success in the pie category was attributed to the integration and turnaround of the Today business. Despite significant price increases, the dry foods and meat categories also achieved good revenue growth during the period.
Challenges and Offset Measures
RFG Holdings faced challenges such as slower consumer spending, a competitive environment, and load-shedding impacting production output and costs. These challenges resulted in volume pressure in certain product categories, with total group volumes declining by 8.5%. However, foreign exchange gains and the acquisition of Today partially offset these challenges. Foreign exchange gains contributed 2.7% to revenue growth, and the acquisition added 2% to overall growth.
Regional Segment Performance
In the regional segment, RFG Holdings focused on improving the operating margin through an effective balance of price and volume. The company was mindful of the negative impact of price increases on volumes due to financial pressure faced by consumers. While negative volume growth was experienced across major categories in the regional business, RFG products experienced a slower rate of decline compared to the market in comparable categories during the first three months of 2023. The regional segment’s revenue increased by 9.5%, with fresh foods revenue growing by 11.8% and long-life foods by 8.2%. The pie category successfully recovered from previous sales and margin pressures, delivering a robust performance.
International Segment Performance
RFG Holdings reported a 13.2% growth in international revenue, primarily driven by strong international selling prices and the weakening of the rand. However, this growth was offset by a 10.4% decline in volumes. The group had increased production volumes in the prior period to meet higher global demand following the failure of the Greek peach crop in 2021. Additionally, the 14.4% weakening of the rand against the basket of trading currencies contributed N$92 million to international revenue.
Impact of Load-Shedding on Production
Load-shedding continued to pose challenges to RFG Holdings’ production output and costs. Despite these difficulties, the company had made extensive investments in backup generators over the past seven years. The operational management teams worked diligently to limit the impact of load-shedding on factory efficiencies. For the six-month period, diesel costs to operate generators amounted to N$37.8 million. At the current levels of load-shedding, the average weekly diesel cost to operate generators stood at approximately N$2 million.
Renewable Energy Initiatives
RFG Holdings acknowledged the sustained levels of load-shedding and accelerated its renewable energy program. The company plans to complete solar installations at four production facilities in the second half of the financial year, with an additional three installations scheduled for the 2024 financial year. These renewable energy initiatives aim to mitigate the impact of load-shedding and reduce operational costs.
Looking ahead, RFG Holdings expects volumes in the regional business to remain under pressure in the second half of the financial year due to weak consumer spending. While inflation has started to ease compared to the previous financial year, the company continues to face challenges from high packaging and raw material costs.
RFG Holdings, the owner of Rhodes fruit juice brand, reported significant interim profit growth despite challenges posed by load-shedding and a competitive market environment. The company’s strategic initiatives, including price inflation management, market share gains, successful integration of acquired businesses, and investment in renewable energy, contributed to its positive financial performance. RFG Holdings remains focused on improving operational efficiency and navigating the evolving consumer landscape to ensure sustained growth and profitability.