RFG Holdings Limited (RFG) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. A warm welcome to the RFG Annual Results Presentation for the year ended the 2 October 2022. I will cover the review of the year, after which Tiaan Schoombie, our CFO, will cover the financial performance, after which I will continue to do a trading review and then also have a discussion about sustainability, our capital investments and some comments on our strategy and outlook, after which we will gladly answer some questions. If we look at the year, we saw strong regional and international sales growth, specifically on the international business, a good recovery, driven by robust growth in export volumes due to the higher global demand, and we also saw some pleasing resilient regional performance in a very constrained consumer environment. We successfully integrated our Today business, where we're primarily focused on restoring profitability, where we had multiple rounds of price increases to recover the exorbitant cost increases, and we saw some margin recovery from October 2022. We saw significantly cost inflation in the past year, and it mainly impacted our canned meat, vegetables and pie categories, where our regional margin was under pressure due to the [indiscernible] and the recovery of prices. We did, however, see some margin recovery, which started in the late part of this financial year. With regards to our international business, we saw a good recovery in profitability where we managed to secure some good pricing in international currencies, and we managed to recover significant cost increases in the world. Obviously, we've got a big benefit also from the weaker rand. If we look at our progress against our medium-term targets that we have set for ourselves, with regards to revenue growth, our target being GDP plus CPI plus 2%, which for the year ended just over 11%, and we managed to achieve a 21.9% growth in total revenue. If we take out the acquisition of the Today business, it was a 19.4% growth, which I think was a very good performance. If we look at the operating profit margin, our target is 10%. We saw an increase in the operating profit margin by 160 basis points to 7.99%, which was also a pleasing performance and moving closer towards that target of 10%. And if we look at our internal equity where our target is WACC plus 2%, which ended up at 16.1% for the year, where we also had a good increase from 8.1% in the prior year to 12.5% in the current financial year. I'm then going to hand over to Tiaan Schoombie, our CFO, who will manage the annual financial performance, after which I will continue with the trade with you. Tiaan?

Good morning, everyone. I'm just going to talk to some of the financial highlights of the year. Strong organic growth of 21.9% to a total revenue of ZAR 7.3 billion for the year. That was on the back of original growth of 13.5% and international revenue growth of 57.4%. Once, of course, the impact that results for the year or rather one-off items, firstly, we received an insurance settlement for loss of profits during the 2020 lockdown due to COVID of ZAR 43 million that income came through in the first half of the financial year, and then there was ZAR 26 million restructuring costs relating to the Today acquisition, of which about ZAR 21 million also came through in the first half of the financial year. The regional margin was unfortunately adversely impacted by the cost pressure on canned goods and some operational challenges at the meat plant as well as the Today -- impact of the Today integration and also significant cost increases in raw materials in the pie category. Specifically, [indiscernible] resulted in a decline in operating profits for the regional segment of ZAR 89 million for the year. Despite that, the International segment compensate -- more than compensated for that. So the operating profit for the group for the year was 54% higher at ZAR 574 million's, And the operating margin accordingly improved by 160 basis points to 7.9%. The International profit increased by ZAR 202 million compared to the prior year. As a result, the EBITDA increased by 33.6% with the margin improving to 11.3%. Headline earnings increased by 36.9% to ZAR 361 million and diluted headline earnings per share was 57.3%, better at ZAR 1.37 per share. The dividend policy of 3x cover of diluted headline earnings per share was maintained and a dividend -- a cash dividend of ZAR 0.458 per share was declared by the Board of Directors. In terms of revenue growth since 2018 financial year, compounded growth rate of 9.8% over the period For the same period until the end of 2021, it was 6.7%. What is also obvious from the graph is the big increase in the international revenue, as mentioned earlier. The drivers of revenue growth for the group. Volume growth contributed 5.5%. Mix was negative at 2.1%, and price inflation was positive 14.1%. Currency changes contributed 2% to the growth in revenue, while the acquisition of Today accounted for 2.5% of the growth. If one breaks it down in the 2 halves of the financial year. In the first half, volume growth was 12.5%. In the second half, it was just below being neutral year-on-year at negative 0.8%. But importantly, as Pieter has said, we started to recover some of the input costs that we had to absorb during the year. In the second half, as can be seen from the graph there, 6.8% price-mix changes in the first half, but 16.6% in the second half. Currency contributed 3.7% of the growth in the second half, as did the acquisition more in the second half obviously. Of course, it was included for the full 6 months versus only 2 months in the first half, 3.4% there. Excluding the impact of currency and acquisition, revenue in the first half grew by 19.3% and in the second half 15.8%. So volumes did come off in the second half, but it was more than compensated for by price increases. An analysis of revenue over the last 3 years just show that since 2020, the normal pattern as -- stables itself again, whereby the second half is always a bigger contributor to total revenue for the year. Normalized operating profit. And in the current year, what is excluded from the reported operating profit of ZAR 574 million is that insurance proceeds and the small impairment loss of ZAR 1 million. So that is excluded, which brings to the ZAR 573 million. And in the prior year what was excluded was acquisition cost of ZAR 4 million, ZAR 16 million impairment loss and ZAR 27 million insurance about -- sorry, relating to the years before 2021. A breakdown between the segments, 2 segments of the normalized operating profit. What stands out is obviously the performance by international in the current year, where it was it has totally underperformed in 4 years prior to the current year. Earnings and dividend. As you can see, ZAR 1.37 and the dividend of ZAR 0.458 is significantly better than any of the prior years. Analysis of international revenue. The split by currency showed a swing towards U.S. dollars. We've seen it at the interim results already. At the expense of sterling, but also a lot of additional revenue in the year came from markets where the U.S. dollar is the currency in which the trade takes place. And to the right, the average exchange rates what's important is, despite the sterling and euro being weaker against the rand or quarter end, stronger against those currencies in the second half. The U.S. dollar was significantly stronger or the rand weakened to the U.S. dollar in the second half, which is important to bear in mind when one analyzes the international results because -- most of the raw materials is bought and paid for in the first half, obviously, at an advance rate of ZAR 15.20 while most of the sales take place in the second half at a much better exchange rate from an exporter point of view. The impact on the coming year's revenue of the weaker rand against the [indiscernible] currencies was a gain of ZAR 518 million compared to a loss of ZAR 136 million in the prior year. In terms of working capital, satisfactory performance given what the position was at the time of the interim results. Net working capital turn over reduced to 25% from 26.2% the prior year. Net working capital days better at a net 115 days, and the big improvement came on the inventory line. Trade receivables and trade payables were impacted by the additional week that was included in the year, but net-net, it is basically a number that is to be expected. Free cash flow of ZAR 253 million, it's only ZAR 6 million better than the prior year. And the 2 -- despite additional ZAR 162 million cash generated, additional income tax payments amounting to ZAR 65 million and maintenance CapEx increasing by ZAR 53 million are the main contributors or the absorbers of the additional cash that was generated. Capital management in the group. The dividend was paid amounting to ZAR 76 million, and expansion CapEx during the year amounted to ZAR 78 million. ZAR 54 million went towards payment for the Today business, ZAR 150 million loans were raised during the year, but at the same time, ZAR 92 million went towards repayment of long-term loans, lease payments of ZAR 35 million and other items of ZAR 15 million, and they rise to a net decrease in the bank overdraft at year-end by ZAR 53 million. In terms of ratios. Given the good performance, net debt to equity as well as net debt to EBITDA improved significantly from the prior year, and return on equity improved from 8.1% last year to 12.5%. The negative here is obviously free cash flow return, which is an area of focus for management. Thank you, Pieter.

Thank you very much, Tiaan, for the financial performance and also saying as we indicated. If we look at our business, we aim to be -- as part of choice for convenience meal solutions, where we look at specifically our regional long life foods, regional fresh foods and our international business and operate in the following product categories: the canned food and vegetables, canned, bottles, salads and pickles, long-life fruit juices, fruit purees, dairy foods, canned meat and dry packed foods. In fresh food side, we operate within the ready-meals category, pies and pastry products, deli bakery and snacks and dairy products. And in our international segment, we do canned foods, fruit snacks in plastic cups, long-life fruit juices and industrial pulps and purees. Our market offering is that we've got a diversified product portfolio. We've got a combination of own brands and private label ranges for all major domestic retailers. In the fresh food side, we have got a long-term partnership with Woolworths. We distribute our own pie brand, and we've got a national pie supply agreement with Engen. In the international side of our business, we are long-term supplier to global retail and premium branded customers. Just looking at our segmental revenue, where the regional Long Life Foods makes up 46%; in fresh foods, 29%; our international business, 25%. If we look at our international business, our production increased from 19% in the prior year to 25% due to strong volume growth, improved pricing and also the benefit of the weaker exchange rate. In Long-Life Foods, the revenue contribution was impacted by growth in international and the acquisition of the today business, which is part of our fresh foods segment. Fresh Foods includes the contribution from the Today's acquisition. Just looking at private label, we've got a dual strategy of growing our branded portfolio as well as manufacturing private label ranges for major retailers. If we look at the graphs on the top. Private label accounts for 55% of group revenue; international is 100%; and our regional business, 42%. If you look at the comparative figures for 2021, it was 44%. RFG also produces private label products in categories we have owned brands to have a strong presence, which can see a greater participation for us in the category. If we then look at the regional performance for the year against the prior year, we see a revenue increase of 13.5%, where Long Life contributed 9.9% and our Fresh Foods business 19.9%, which I think was a good performance. Unfortunately, on the operating profit side, [indiscernible] decline, as Tiaan mentioned, from ZAR 412 million to ZAR 323 million, and our operating profit margin declined from 8.6% to 5.9%. The drivers of the revenue growth was volume and also as was mentioned, price of 10.7%, negative mix of 2.7% and then also acquisition of 3.1%. If we then also look at the graph on the right-hand corner, we would see a growth over the last 5 years, average growth rate of 8.1%. Although we saw in the regional performance, a decline, it also shows the opportunity that we've got in our business. But just to give a bit of insight on the performance over the past year. I'm looking at specific categories. Looking at fruit juices, it was the main revenue driver for us in Long-Life Foods, and it also contributed to an increased market share. If we look at our herbs and spices category, we also continue to achieve good growth and customer response to the Hinds brand. On the canned meat side, we had a decline in volumes, owing to increase cost of cans and also our raw materials. We also have operational challenges at the meat plant, mainly due to impacting our electricity and also the water supply. If you look at canned vegetables, the volumes was impacted by the high price in the prior year when our competitor experienced some quality issues and we saw exorbitant increases in raw and packaging material. On the ready-meal side, we saw a resilient performance in the constrained consumer environment, where we continue to achieve some good volume growth. If you look at the pie category, we are seeing that our volumes are starting to recover. Our margins were under pressure owing to meat price inflation and we saw some margin recovery from October with multiple price increases that we had to put through in the marketplace to recover enormous cost increases. Just a couple of comments on the Today acquisition. We generated revenue of higher than ZAR 47.2 million (sic) [ ZAR 147.2 million ] for the 8 months since acquisition. We saw some one-off cost, as Tiaan mentioned, of ZAR 25.7 million, which resulted in a loss of ZAR 7.7 million. We some of these SKUs as part of our plan to restore the profitability. And we see that the Today business is well positioned ahead of the first festive season, and trading period in the group, and we encourage about the growth prospects for that part of our business as we are comfortable with what we have managed to achieve after taking over the business the 1st of February in this financial year. Looking at the rest of Africa. We sell our products in 12 other African countries where our sales of our long-life foods into the Rest of Africa increased by 14.5% to ZAR 414 million. It accounts for about 12.3% of our regional Long Life sales. Our main growth drivers are fruit juice, canned meat and dry fruits, where we got the long-term relationship with major distributors and customers in Africa. We also look at the graph. The last 5 years, we managed an average growth rate of 10.7%, which is a decrease. If we look at our market shares. This may be 1 or 2 comments. We maintained our positions in all our categories, and we saw some strong growth in fruits juices, following the recovery of the 200 ml pack size, which is during the COVID period showed huge decline. So if you look at all those categories, specifically canned food, canned meat and meals where we still are the #1 in those specific categories. And if you look at Long Life Fruit Juices specifically, increased our market share to 28%, which was really a very pleasing performance. If we then look at our branches, branches in canned food categories normalized after the recall of canned products by our biggest competitor in July to September 2021, managed to keep our #1 shares in canned pineapple and canned tomatoes and also the #2 positions in the other categories. If we then look at specifically fruit juice and Hinds herbs and spices, looking at those branches we saw some good share gains. Looking at the 100% fruit juice category, managed to get to a 20% share, being a very strong #2 and also important to see our spices, herbs and pepper category, where we increased our share to 7% and in a #3 position. Product innovation, obviously, are critically important for us. We've got some ongoing newness, which is a key driver of sales and market share growth. We do lateral brand extensions into adjacent categories. We saw the entry of the Rhodes brand into fruit juice market about 6, 7 years ago and having exceptional success showing our brand shares. We rebranded our Squish business -- our Squish products to Rhodes Squish and then we also launched into the curry powder the Hinds brand replacing the Packo. We've also had some range extensions and product upgrades through innovation. We had some range extensions upgrade. We also had some flavor extensions and the reformulations and some new packaging formats and sizes. We also look at the global health and eating trends, growing environmental consensuses, broadening lifestyle food choices and also looking at the increasing plant-based eating habits. Just some examples of some product innovations and brand extensions, as I made mention, moving the Hinds brand extended into curry powder rebranded from Packo and also some range extensions in dry foods category to new packaging formats and sizes. Also some extensions in the fruit juice category, where we launched some new flavors and also introduce some new products into the -- into some of our retailers. Then also looking at the healthy eating and lifestyle trends, where we increased our product range and also some plant-based products that we launched. If we then look at the international -- at our International segment, I think an important note is that we previously made mention that we are focusing extremely hard on our revenue management, meaning that we would like to expand our business in more parts of the world and spending our risk a bit and also with that strategy, looking at opportunities for us to sell our product quicker to ship our products quicker. And you would have seen it compared to the previous year, we've increased our presence in South America from 3.5% in the prior year to 9% and also increased our Australasia business to 10% from the prior year. If we then look at the performance. I think a very pleasing performance on the international side, increased our revenue to -- with 57.4% to close to ZAR 1.8 billion. Operating profit of ZAR 209 million, giving us the operating profit margin of 11.7% against 2021 close to a breakeven. The drivers of revenue growth. Volume up 18.3%. Price and mix up 28.7% and ForEx contributing 10.4%. Also pleasing to see the growth over the last 5 years of 16.1%. I think also very important from the margin perspective. We have made mention at previous presentations. We strive towards that 10% operating margin through the cycle, and that is obviously going to be very important for us to ensure to see how we're going to do in the next year to come, but I'll make a bit of some comments later in that regard. If I look at the -- just a bit of the review of our business. In the past year, we've increased our production levels as we meet the high demand following the failure of last year's peach crop failure in Greece. From a port congestion perspective, we also saw some export growth benefited as condition at the Cape Town port eased. We were fairly lucky with a bit of a tailwind that we managed in September. We really did exceptionally well with shipping of our -- of containers, which obviously benefited a lot in this segment specifically. The port strike only happened in October. So we were fairly lucky that, that was after our financial year-end. We had a currency benefit where the rand weakened by 7.1% against trading currencies resulted in a revenue uplift of ZAR 118 million. Our production levels, we plan to normalize it in 2023 after we accelerated it in FY 2022 due to the failure of the peach crop increase last year. Looking at our Eswatini pineapple production, our export volumes will be increased with the completion of the development of our new plantations, and we expect that production will reach full capacity by FY 2024. Then just a couple of comments on sustainability, which is close to our heart and important to our business. We've got an integrated ESG strategy, which is aligned with the United Nation's Sustainable Development Goals, where we look at those specific areas. Just a couple of comments also on renewable energy. We focus on renewable energy, and we've actually accelerated it by -- due to the acceleration of load shedding, we're busy with installations of solar panels at our current Drakenstein site also at our vegetable plant in Limpopo in Dzanani and also on meat plant in Krugersdorp. We've also already have solar installed at our fruit juice facility in Wellington, and we also at our last Board meeting approved more solar, increasing our solar ability at the juice facility after we had put up a new warehouse. And also, we will continue where we also see some opportunity, we will also increase our solar installations. Looking at our environmental targets. Our environmental reduction targets has been set for 2025, and we measure our efficiency across the 4 pillars, which are energy, water and waste management as well as being our gas emissions. And exciting reductions in waste management, auto and energy intensity was achieved in the 2022 financial year. Looking also at reducing the food waste where we are [ signature ] at the National Food Laws and Waste Agreement and committed to reducing food waste by 50% by 2030. With regard to sustainability reporting, ranked fourth out of 16 companies in the food and beverage sector in the Sustainability Data Transparency Index in the third most improved company on the JSE. Looking -- a couple of comments on capital investment. Our capital investment obviously aims at generating efficiency gains. Our expenditure, as Tiaan mentioned, was ZAR 260 million for the 2022 financial year, of which maintenance expenditure made up ZAR 142 million. Our maintenance CapEx to turnover, a metric where -- which we closely monitor as well, 2% up against 1.9% in prior year, and we plan to capital investments in the next financial year of around ZAR 250 million. You see on the bottom the split between maintenance CapEx, expansion CapEx and also the pineapple crops includes an estimated ZAR 50 million for our pineapple plantations. If we then look at that the production base. We've got a well-capitalized production base with capacity for growth. If you look at our major products in FY 2022 or I might mention out the new warehouse at our fruit juice plant in Wellington. We did the integration of our Today pie business. We've had some equipment upgrades at the Eswatini plant and 2 pie facilities in Gauteng and we completed our pineapple plantation expansion in Eswatini. As you would know, our 14 production facilities are located close to end markets and sources of raw materials. And just a couple of comments on our strategy and outlook. Might mention to say that we aim to be the supply of choice of best frozen and long-life meal solutions in our selective market with our 5 strategic pillars being a diversified food group, value-added meal solutions, market-leading brands, our partnerships with industry-leading customers as well as having world-class manufacturing facilities. Our strategic growth drivers, specifically from a diversified food group perspective is we will continue to diversify regional and international customer base. I made mention specifically of the revenue management of our international business, where we have increased in other parts of increase our revenue in other parts of the world. Then we will continue to rebuild on acquisitions, which are aligned to our core product categories. like the one that we did with Today and continue with new product launches. If you look at value-added meal solutions, has shown some -- the stuff that we do, we'll continue our new product development and innovation, range and pack format extensions across our brand as well as new private label ranges for major food retailers, and to continue to drive sales in frozen pies and in the snacking category. Looking at our market-leading brands, we will continue to invest in them, specifically in areas of high growth, further lateral product extensions, as was mentioned, and continue to grow our brand shares, particularly in categories recently entered through acquisition. I think we've also shown you some of our brands has increased specifically in fruit juices and in dry fruits, which was extremely pleasing for us. If you look at the fourth pillar. Our partnerships with industry-leading customers. Expanding our brand into selected Asian and African markets and also our opportunities as augmented in South America and also increasing by own brands exports to U.S. retail and food service. Very important for us, our world-class manufacturing facility, as I might mention, important, the metric of maintenance to -- the maintenance spend, and we will continue to invest in our facilities, enhancing our production efficiencies and ensure that we increase capacity where needed, and obviously, are critically important is the global food safety certifications that we got at these specific plants. Then my last chart -- my last slide, just on driving shareholder value. I think 4 specific important metrics for us, which aligns with our goals that we've set ourselves. We will continue to drive revenue growth. We've got production capacity available at most of our facilities, and we will focus on specific growth categories, being fruit juices and dry goods and with the increase in our pineapple production, and we'll continue to seek opportunities for strategic value creative bolt-on acquisitions. Then I think very important for us is our operating margin expansion strategy. I think there's big opportunity for us, specifically here where we need to focus on better price, volume margin management in our regional business. And we will -- we need to maintain our revenue margins. We need to ensure that, that international margin of 10% through the cycle that we can achieve that. Very happy, obviously, with the margin that we managed to achieve for the current financial year, and we need to continue to increase efficiencies at our factories. Then increase our return on equity. And there, we will continue to drive profitability. Then the other metric, which is of critical importance to us is looking at our cash flow management. Tiaan, made mention of some of the metrics there. I think we had a fair performance there, an improved one against the prior year. We will continue to reduce it all and packaging stockholding after the COVID period specifically where we had to increase the [indiscernible] and packaging material due to supply chain issues that we had. We need to continue to drive that timely international shipments. I think important to note also is it's very much part of the revenue management strategy for us to ensure that we can ship our products quicker if we've got a better diversified customer base and then looking at strategic capital allocation that ensures that we manage the returns that we are -- that we want to achieve. Thank you very much. I think that ends our presentation and Tiaan and myself are happy to answer any questions that you might have. Thank you.

[Operator Instructions] Pieter, at this stage, we don't have any questions coming on the webcast. If anybody does have any questions after the presentation, they're welcome to send them through to us, and contact details are on the rfg.com website, and we will respond to those questions as they come in. We're just refreshing the questions and the don't appear to be any. Pieter? Pieter Hanekom, here's a question from [indiscernible] Securities. [indiscernible] for an outstanding set of results. Do you see any potential opportunities to make acquisitions in the international space outside of South Africa? If the trending decline in rand strength [indiscernible] your international operations provide currency hedge. One challenge is that moving goods over long distances is slower and costlier than using or packaging the products at the [indiscernible] consumption.

Yes. Thank you for that question. I think my comment on that would be, if I look at the current percentage of our international business towards our total revenue I think we're quite comfortable with the percentage at this stage. I'm not saying that we won't look at any opportunities if it arises. I think it will have to be an extremely good opportunity for us where we would see some shareholder value added and earnings -- it needs to be earnings accretive I think it is not something that's on a rate as we sit here today. But obviously, if there is an exciting opportunity, we will be interested to have to look at that. But I don't think that will be our main focus to necessarily have an investment in other parts of the world, although it's not something that we will be -- that we will not be looking at if it's a really exciting opportunity for us.

Thanks, Pieter. And then there's a question from Thapelo Mokonyane from HSBC. Thapelo says how do you -- how should we think about the regional margin going forward?

Yes, I think Thapelo, thank you for that question. Obviously, that is a part of our business. As I've also made mention where there's massive opportunity for us to increase that margin. I think a couple of comments in that regard. From mid-September to October, we have seen a recovery in those margins. It was a difficult 6 months, the last 6 months as we would have seen in our regional business due to the multiple increases that we had to do in the trade, which obviously is not a very easy thing to do in a constrained environment. I'm quite optimistic that in the next 6 months, we will see a better -- a lot better performance in that part of our business. We are focusing extremely hard on the gross volume margin management. I think also one thing that we also do need is a bit of cost relief. I foresee that inflation will plateau in 2023. And hopefully, there will also be some areas where we might get some relief in costs. And specifically, we need some relief in [indiscernible] costs because the canned goods in that specific segment was under pressure due to that -- those huge increases that we experienced. Obviously, also though that it's not only cost increases, but it's international commodity is imported. And obviously, the rand -- the weaker -- weakness of the rand also has some impact on those specific costs. So we had huge increases north of [ 30% ] in those specific categories -- in those specific costs that we had to recover from the market, which was extremely difficult. We have seen the increase has gone through, and we hope to see a good recovery in the margin. It's still a bit early days. what we see in the latter part of the financial year in September. And from October onwards, we have seen a recovery in those margins. Obviously, the ideal margin price is to get closer again to that -- is to move towards that target, but we need a bit of cost relief also and the inflation to stabilize for us to be able to get closer to that margin.

Then there is a question from Charles Boles from Titanium Capital. And he's asking, how viable is it to achieve a 10% international margin through the cycle? 2022 International has done well, but prior years were not so. Is what margin is achievable?

Yes, I think I've seen in the international market, what we've seen in the past year, I think there was a bit of a fundamental change that has happened. A couple of things that excites me in that business to say that is something that I think is achievable for us. I think number one, the sale of the Greek crop really there has a lot of advantages to it. There was a couple of cans that also closed down in Greece with a bit of less compensation. And we've also seen that the international markets in the international business, specifically also in Europe, we've also -- they've also had the same increase in canned costs and also a huge increases in energy. So what we see is that looking at the year to come, we're currently in busy negotiating prices for the new crop that starts in a week or 2. actually sold a lot of our product already. So I feel quite confident that we've got a bit of a transform business from a market perspective that we had a couple of years ago. We must recall we had a couple of headwinds in prior years, number one, have an issue with the drug where we have quality issue on peaches. And then we had the lockdown specifically in the Eastern markets, which are profitable markets for us, where they lockdown using our product in the bakery categories, we were then forced actually to open up other markets. And we managed to open up other markets that also is profitable ones. And so I think we really from a -- fundamentally, a lot better position from the international side than we had been ever. I think we've got an exceptional -- so we see that sells our products, we very much in the markets after [indiscernible] opened up, I think that's really important. And we're visiting our customers we can do, and we continue to do revenue management by selling to new customers in the business, which opened up for us due to the Greek crop failure last year, we've also [indiscernible] the Spanish crop being under pressure this year due to some hail damage. So there's also opportunity for us, and we are taking those. So I feel a lot more confident with regards to the international business to get that through the cycle, 10% operating profit that we [indiscernible].

Pieter, the next question from Thapelo, again, from HSBC. Lastly, related to what you've just been speaking about, how sustainable is the International going into 2023? Hope you have any additional comments to add to what you just said?

Yes. Graeme, I think maybe just 1 or 2 comments that I compare to that, I think we -- I start with a lot of the points, but they think that we obviously would love to get to that margin again. We're busy with putting our prices in the market, Tiaan mentioned. Obviously, the other cost that we had last year. This year, we would have also the higher costs from a can perspective in the first 3 to 4 months, yes, and I think we continue to shift some of the old products at the old cost and where we've got those shipments still to go. Then the new crop kicks in, and we also work with agriculture, but we're quite confident that we're going to have a good crop from apricot and peach perspective, we're not worried that the volumes will not come in, unless something really funny happens. So we're quite confident in that regard. So yes, I think we've got a chance to be able to look at that -- driving that 10% operating margin. Again, it's a bit early days, as I said apricot earnings will start to gain at the end of this week, start next year and then beginning of January, we will can the peaches. But we're quite confident that we will have a good performance again in the year to come.

Thanks, Pieter. Then another question from Titanium Capital. Why do you think the Today business performed poorly historically and what changes have been made under RFG's management?

Yes. I think what we have done in the first 7 months, which we knew that we had to do, number one, Obviously, we knew we had to close down the facility in Atlantis, we had spare capacity at our plants have been hoping and renew as of the one, and that was an agreement we had with the Competition Commission that, that would most probably be the case that we've closed down the plant. And so number one, we closed down the plant and move the volumes up to our tank plant. Obviously, we will get operational leverage. Tiaan made mention of the initial cost we had in the business that was due to closing down the facility, where we had to pay severance packages to the employees, and obviously, they had to move equipment and move stock around the country. So we had a lot of additional cost as was made mentioned. And then you also had to do some SKU rationalization, as I mentioned in my presentation. And then what also happened is -- it was a bit of a perfect storm when we took over the business. The price increases that actually cover cost push in the previous 6 to 9 months doesn't go through in the trade. So when we took over the business, we will be high on price increases. And then we got the exorbitant cost increases that came through in the next 3 to 4 months. So we had to go, I think, 3x back to the trade to be able to recover costs. And you can imagine, if you take over the business on the 1 February, as we all know, from a competition commission perspective, we're not allowed to have any discussions on pricing up until the day that you start with the business. And the first thing you do is to go to a retail and tell them that you're going to increase the prices. So to be straight up, it was a difficult time for us, but I'm extremely happy to say that I think our execution of the takeover was really very good. We have managed to get the price increases, margins have started to recover, and I'm quite confident that we will have a good result in the next financial year and also in the next 6 months.

Pieter, then another question from Charles from Titanium Capital. was the international margin in 2022 inflated by a mismatch between the exchange rate of the buy-ins of raws and packaging material compared to the sell-out initials...

Yes. I won't call it a mismatch, but there was certainly a difference as I mentioned in the slide about international trade. We always guide that it's important the extense side that prevails during the to half of the financial year because in the first half, we manufacture all the products that we export thereafter. So this year and was an ideal situation, which prevailed where while we were manufacturing the exchange rate was ZAR 15-odd. And during the second half, when we exported and there was no manufacturing, so very little cost incurred during the second half, it was ZAR 16 between ZAR 16 and ZAR 17 to the U.S. dollar. So that was the ideal situation. The prior year, I think it was the opposite. So yes, it is important what happens in the 2 halves, but yes, we benefited from it in the current year. So we obviously are aware, we can't manage the currency, but we do have what we can via through our internal edge to try and minimize the impact of foreign exchange fluctuations on the results of international specifically.

Thanks, Tiaan. Pieter, there's a question from Nick Wilson from Media24 Business, saying you listen with interest when you said you're expanding into health brands and plant-based foods, however you push are you planning?

Yes, it's -- from that perspective, it's specifically at this stage more towards our ready-meals part of our business, although it's not -- at this stage, a really big part of that business. It is something that we're seeing some good growth, although of a low base. We work very closely with our customer in that regard and continue to expand in products in that go. We really closely obviously monitor that -- but as I said, the base is still fairly low. But yes, I think there is some good opportunity for us in the future in that part of the business. I think 1 thing that is important to note at this stage due to the lower volumes, obviously, it's not a key product to manufacture. And -- but as I said, I think the reason at this stage is quite low, but there is some good growth that we are seeing in that specific category, and we are monitoring it pretty closely.

And then another question from Thapelo from HSBC. What kind of margin do you aim for in the Today business?

Yes, I think, obviously, the margin that we also ended a operating profit of 10%, that must be our goal. If you don't get to that 10%, I think it's going to be difficult for us to drive our group goal of 10%. So that leaves the goal to achieve a 10% operating profit margin.

And then a question from Morgan Stanley. What is the expectation for the upcoming festive season? Have the retailers bought more stock than last year for the Christmas trade or a soft consumer macro conditions by applying that Christmas season won't be so good?

Yes. I think what we have seen, we've seen some -- we see some good purchases from our customers in latter part of September as well as into October, November. It is usually the case that the retailers will stock up to have their stock in by the end of November, beginning December. And then the million-dollar question is what's going to happen in December usually? If you saw the results of and commentary of in the last week, and they made mention that they well stocked in their business. Obviously, we work closely with our retailers with regards to stock. On the one hand, you don't want to be overstocked. And on the other hand you don't want to be understocked. It's a bit of a balance. I think it will be interesting to see what's going to happen with all the Black Friday specials. That's great in the next week. And then it's -- let's see what's going to happen in December. As we sit here today, we're positive about what can happen in -- what will happen in December, and that will get some of the volumes going through. But it's a bit early days for us to see it. But from the retailer's perspective, they definitely are buying in stock, looking forward to a good December season. But let's see what happens with Black Friday. Stocks are being cleaned out Black Friday deals and also what happens then. And let's look forward to a good December, but we're quite optimistic that it will be a good December, but let's see.

Thanks, Pieter. There are no more questions coming in on the webcast. Thanks.

Thank you very much for everybody for joining. We appreciate it.