Johannesburg - Pioneer Foods increased group turnover by
5.1 percent for the four months to January, mostly as a consequence of
inflation.
In a statement issued on Friday, the listed food company
said contracting volumes were evident in a number of categories for varying
reasons.
The South African business increased turnover by 7.6
percent, while International turnover declined by 10.3 percent.
The company notes the 2016/17 financial year will be a
tale of two halves for Pioneer Foods.
“The first half margin and profitability will be
materially impacted by non-recurring raw material vagaries.”
Pioneer Foods adds it, amidst the worst drought in
decades, made a conscious decision to guarantee supply for maize meal brand,
White Star.
This, it says, is despite high raw material costs and
rand volatility.
The company, home to Sasko, Weet-Bix and Ceres, says this
means, although value growth and market share are positive, a significant
profit impact can be expected from the expensive procurement position relative
to market pricing for the first half.
It notes the balance of Essential Foods performed
satisfactorily given a sustained and pleasing performance from bakeries.
The International Division encountered strong headwinds. “The
raisin crop shortfall, significant juice concentrate cost push, volatile
currencies and weak consumer demand on the African continent have significantly
impacted profitability to date.”
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However, the 2017 raisin crop looks reasonable, which may
bolster the second half performance, it says. Final approval from the Kenyan
competition authorities for the Weetabix East Africa transaction remains
outstanding.
Its Groceries Division was negatively affected by lower
volumes consequent to softer trading conditions, increased competition and
significant cost push inflation. The high base-effect of beverages in the prior
year, due to the extremely hot summer season, was not repeated this year.
“Pleasingly, the new Weet-Bix capacity expansion has been
commissioned, which bodes well for accelerated growth. Manufacturing
consolidation, cost and an efficiency focus continues to make progress.”
It expects the second half to be better because of
improved maize profitability, a satisfactory raisin crop, new Weet-Bix capacity
and bakeries in the Western Cape regaining momentum; as well as cost respite on
key inputs.
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