RFG Holdings plans price strategies to counter input costs

SOUTH AFRICA—RFG Holdings, a South African food company, has indicated that it will pursue further price strategies to offset increased input costs.

The company manufactures a variety of goods, including canned fruits and vegetables, frozen pies, infant meals, and spices.

This information was made public during a meeting between CEO Pieter Hanekom and analysts seeking insight into the company’s results.

Hanekom stated that RFG is dedicated to an ongoing initiative to build alternative energy sources at its plants in order to solve the issues created by the country’s regular power outages, also known as load-shedding.

Henekom underscored the company’s commitment to working on recovering input costs to sustain margins during a conference where he discussed the company’s results with analysts.

However, he noted that the “low economic growth environment” continues to put pressure on volumes.

RFG reported an 8.7% year-on-year increase in revenue to R7.9 billion ($421.1 million) in its fiscal year ended October 1, mostly due to a 12.9% increase in pricing.

While the business stated that input cost hikes had slowed in most categories, it emphasized continuously high costs for tinned cans and paper wrapping.

Despite an exceptional 32% growth in operating profit to R757 million (US$40.03 million), decreased consumer spending and competition promotional efforts resulted in volume pressure, resulting in an 8.3% year-on-year decline in overall group volumes.

RFG, a global exporter with key markets in North America and Europe, reported a 5.3% rise in overseas revenues over the previous year. However, a 13.6% drop in volume cancelled out these gains.

Export cargoes were further impeded by Cape Town port congestion, which caused delays ranging from 12 to 16 days.

When asked about the port delays, Hanekom informed analysts that products were still being supplied, although with minor delays.

RFG, like many South African firms, has experienced frequent power outages, prompting considerable expenditures in backup power production during the last seven years.

The company spent an additional R25 million (US$1.32) on new and replacement generators during the reporting period, with diesel expenses for generator operating totalling R65.7 million (US$3.47 million) for the year.

RFG has also invested in alternative energy solutions as part of its effort to address power concerns.

By the end of fiscal year 2024, all but three of its sites are scheduled to have solar energy capability, with installations currently finished at seven production plants and plans for four more.

Notably, RFG’s troubles are consistent with broader industry issues, as indicated by South African poultry producer Astral Foods reporting its first annual loss earlier this week.

Astral Foods claimed load-shedding, bird flu, and excessive feed costs as contributing factors to the company’s financial woes.