Operational review

Consumer Brands – Food

 

Performance

Revenue declined to

R9,7 billion

 

Operating income decreased to

R828 million

 

Operating margin down to

8,5%

(FY17: R11,1 billion)   (FY17: R1,3 billion)   FY17: 11,5%)
         

Excluding VAMP, down to
R8,7 billion

 

Excluding VAMP, down to
R1,1 billion

 

Excluding VAMP, operating
margin down to 12,5%

(FY17: R8,9 billion)   (FY17: R1,2 billion)   (FY17: R13,2%)
         
% contribution to Consumer Brands – Food revenue
         
% contribution to Consumer Brands – Food revenue
         

Salient features

Consumer Brands – Food

* Mill bake includes the wheat-to-bread value chain and flour milling.
** Nielsen 3mm September 2018.

  • Focus in Groceries on balancing volumes and profitability and recovering market share
  • Share gains in chocolate (slabs and countlines)
  • Focus on mix and volume recovery in Snacks & Treats
  • Beverages benefits from investments in efficiencies; ready-to-drink and concentrates drive market share growth
    with steady performance in sports drinks
  • VAMP Germiston facility resumed production on 12 October 2018

Excluding the significant impact of suspending the Valued Added Meat Products (VAMP) operations, revenue in Consumer Brands – Food declined 3%, in line with volume declines, and with virtually no inflation in this segment. Excluding VAMP, operating income declined by 8% to R1,1 billion.

At Groceries, the impact of volume declines and competitive market pricing resulted in an operating income decline of 27% to R432 million. Contributing factors included supply constraints in condiments and spreads, and the growth of private label on the back of extremely competitive import pricing.

Snacks & Treats’ category volumes slowed significantly in the second half, particularly in channels servicing lower-income groups. Despite share gains in chocolate, revenue declined 4% to R2,1 billion. Lower volumes, coupled with an adverse product mix, resulted in operating income decreasing 6% to R305 million.

The Beverages business performed strongly throughout FY18, with revenue increasing 8% and operating income by 48% to R213 million, benefiting from previous years’ investments in cost-containment initiatives and improved factory efficiencies.

VAMP’s performance was severely impacted by the well-publicised closure of its facilities in early March 2018. Revenue declined 52% to R1,1 billion, with an operating loss of R252 million. Halting these operations allowed us to undertake significant refurbishments of our production facilities and allowed dedicated time for employee training and education, which culminated in reopening our Germiston facility on 12 October 2018. The Clayville abattoir will supply raw material requirements for the Germiston facility, as well as fresh meat cuts to the market. In addition, it will continue to contract slaughter on behalf of approved pig suppliers. The Enterprise meat-canning operation, which is a separate unit on the Polokwane site, restarted production on 12 September 2018.

Structural refurbishments have been completed at the Polokwane facility and it is currently being assessed by the Capricorn Municipality. Full production will begin once all required regulatory approvals have been issued.

Consumer Brands – Food