SOUTH AFRICA – Rhodes Food Group rewarded investors with a maiden dividend of 24.8c per share after more than doubling annual profits for the 2015 financial year.
The dividend, based on a cover ratio of three times diluted earnings, sent the stock soaring more than 4% on the JSE on Monday, and stretched gains since the company listed in October last year to 90.3%, according to Bloomberg data.
Rhodes Foods, which recently acquired Halaal foods business Alibaba and global foods manufacturer General Mills, pinned the doubling of annual profit to R169.7m in the year-ended September on increased demand for its canned meat, fruit and vegetables products.
Long-life canned foods provide a cheaper alternative for South African consumers grappling with higher interest rates and increasing inflation.
The company’s international operations had also improved in the year under review, benefiting from the rand losing ground against the dollar, it said.
Rhodes mainly exports its food products to Europe, the Far East, the US, Canada, Australasia, Russia and the Middle East. It operates in 14 countries within sub-Saharan Africa. SA is its biggest market.
In the past year, the company has pursued acquisitive led growth by buying business that complement its existing product offering and facilitate entry into new markets.
Four acquisitions were conducted in the year under review: fruit juice maker Pacmar, vegetable canning and salad bottling business Deemster, savoury pastry maker Saint Pie and puree maker Boland Pulp.
Rhodes said it expected these businesses, as well as General Mills and Alibaba, which makes samoosas and Indian foods, to be earnings enhancing in the 2016 financial year.
It has budgeted R252m for investment in capacity expansion and the upgrading of production facilities.
Willem Pienaar, an analyst at Cratos Wealth, yesterday sang the praises of Rhodes’ strategy to make smart acquisitions.
“They have shown they have the ability to bed down acquisitions well and they have continued to deliver; although they have not been listed very long.”
Mr Pienaar highlighted that Rhodes traded at a premium compared to its rivals and warned of margin pressure in the year ahead from the expected increase in local food prices.