Bidcorp Emerging Markets
With geographic footprint over four continents, this division includes Bidcorp operations in Africa, South America, Asia and the Middle East. African operations manufacture and distribute meat, poultry, dairy and general food ingredients as well as baking ingredients and equipment and a multi-temperature foodservice offering of a full range of ambient, chilled and frozen food products. Asia and the Middle East distribute high-end speciality products into the western styled food market with supply exclusivity in many global brands. South America sources and distributes frozen, chilled and ambient local product into the independent street market across both Chile and Brazil.
While Bidcorp has grown into a substantial international business, it remains true to its South African heritage and the JSE listing is an exciting platform to share the next chapter in this success story. The focus as a standalone foodservice company will strengthen management’s determination to continue generating and enhancing sustainable, long-term returns for all stakeholders.
Food Africa (BFA)
BFA returned excellent results, despite macro-economic challenges and heightened credit risk. Exchange rate fluctuations and inflation created trading opportunities. Sales exceeded budget, as did trading profits. However, margin pressure intensified.
Net sales growth exceeded food inflation, driven largely by pleasing sales gains at Food Ingredients (BFI) across the independent channels and Foodservice (BFS) in the independent and national account channels.
Bakery Solutions (BBS) continued to grow its penetration of the retail and franchise sector. Food Exports (BFE) achieved substantial growth in Zambia.
BFS’ excellent growth was all organic. The independent and national account segments both achieved double-digit growth. The independent or street trade channel now accounts for more than half of sales.
A major contract win was recorded in the catering sector in the first half. Growth was also driven by the online ordering platform and private label product lines.
BFI drove growth by focusing on its own manufactured lines and product brands. Volume growth was recorded across most sectors and categories. The butcheries segment made impressive gains, as did casings (natural and artificial), additives and spices, condiments and packaging.
All Crown trading operations reported solid growth.
BBS had an excellent year, with focus on innovation and product development across its own manufactured products while strong growth was seen in the confectionery and sugar and syrup categories.
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All trading branches built momentum on the back of a strong fourth quarter.
BFE made market share gains. Strong performance by the Zambian operation is expected to continue.
Brazil
Trading challenges mounted in a year of political and economic crisis. Foodservices were not hit as severely as some sectors of the economy, but out-of-home eating declined by an estimated 30%. In this environment, the business did well to maintain sales volumes while minimising the impact on trading profit.
Bad debt levels were well managed and expenses well controlled. The implementation of new IT systems contributed to routing and distribution efficiencies. Further improvements were evident following the opening of our new warehouse late in the second quarter. New trucks were purchased.
Regional reorganisation in the new year will ensure major benefits of improved cost of sales and better customer service.
The first supplies from Bidcorp Procurement Company (BPC) contributed to improved performance by our procurement department. A new branch was opened in Santa Catarina.
Better growth is projected for 2017. Acquisition opportunities will be pursued.
Chile
Our growth strategy was impacted by the slowdown of the national economy and belt tightening by consumers. Despite marketplace pressures, year-on-year sales and trading profit growth were achieved.
Performance was underpinned by new business gains, robust cross-selling and the introduction of meat to the product mix. The focus on collections and debtors management was tightened up and contract terms were renegotiated in some instances. Business casualties in the customer mix became cause for concern. Foodservice teams performed well.
We opened a new branch in Concepción and acquired a small Concepción-based distribution business. We disposed of our Santiago fresh bakery operation.
Santiago branch opened new sales channels and grew profit. The Puerto Montt operation grew its customer base.
Greater China
Despite a fiercely competitive market, a slowing national economy and pressures on the tourist industry, profit growth exceeded expectation. Sales were 4,2% higher, while expenses were controlled well, which resulted in trading profit increasing by 20,8%.
Hong Kong
Pleasing annual profit growth was achieved. Gourmet Cuisine did well on the back of strong promotional support while natural and organic food lines maintained good growth momentum. In Macau, solid sales were seen across the meat, dairy and seafood categories.
Continued momentum is expected in the coming year. Sales growth is expected from newly launched operations (Wine and Mastery Butchery). Continued growth of the natural foods product catalogue is planned.
China
Mainland operations put in another pleasing performance, with volumes and profits well ahead of projections.
Dairy and meat volumes to hotel and restaurant customers in Shanghai show continued growth. Strong supermarket demand underpinned gains in Beijing while bakery, retail and foodservice lines did well in Guangzhou. Sales in the Shenzhen foodservice and restaurant channels showed improvement. The President Products brand was the star performer.
Business growth continued in second-tier cities such as Changsha, Xian, Sanya and Wuhan.
Continued growth is projected for 2017. New product lines are being introduced.
Singapore
The business showed evidence of a turnaround, with profit in line with expectation while expenses were rigorously managed.
Sales volumes fell, however, in line with the ongoing transition to a fully fledged foodservice operation.
Low-margin operations were either closed or scaled back.
The largest division, Foodservice, continued to grow, supported by strong penetration of the restaurant industry. Gourmet lines performed strongly.
The Export division was reorganised into two businesses. PastryGlobal Singapore was integrated into Foodservice and Gourmet Partner.
Middle East
Regional growth remained sluggish. However, pleasing sales and trading profit growth was delivered, with strong contributions from UAE and Saudi Arabia. Cash generation remained strong. Improved supply chain management drove substantial inventory management improvements. Working capital was well managed.
Horeca UAE reported solid year-on-year growth in sales and trading profit, despite a disappointing fourth quarter that was impacted by pressure on the tourism sector. Competition increased. However, the retail channel secured pleasing revenue gains.
Al Diyafa (Saudi Arabia) enjoyed pleasing sales and trading profit growth. Retail achieved good momentum following additions to the range and increased promotional activity. Meat was added to the category mix and three new brands were introduced.
F&B Partners (Lebanon) delivered a solid volume increase on the prior year, but losses persisted. Bidcorp disposed of its interest in F&B at the end of May.
BPC
Improved foreign exchange management and significant demand from other Bidcorp businesses resulted in BPC’s first operating surplus. The product mix was further widened and the number of supplier countries grew.
Buying of seafood products from Asia represents an area of opportunity. Growth here will be energetically pursued in 2017. Investment in new systems is under consideration.