Inflation buoys Pioneer Foods income

Photo: Simphiwe Mbokazi

Photo: Simphiwe Mbokazi

Published Feb 10, 2017


Johannesburg - Pioneer Foods increased group turnover by

5.1 percent for the four months to January, mostly as a consequence of


In a statement issued on Friday, the listed food company

said contracting volumes were evident in a number of categories for varying


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


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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