JOHANNESBURG – Pioneer Foods yesterday flagged the possibility of muted growth in consumer packaged goods as its profits soared in the year to end September, buoyed by the recovery of maize.
Chief executive Tertius Carstens said there was a high probability that inflationary pressure driven by the continuing currency weakness and increased international oil prices could curtail growth in the future.
“We thus anticipate muted consumption growth to be a short- to medium-term reality,” Carstens said, adding that the group would focus on sustaining the relevance of its brands, cutting operating costs and improving efficiencies to cushion the probabilities of restrained growth. Pioneer, maker of brands including Sasko, Weetbix and Liqui Fruit, recorded a 26 percent increase in adjusted operating profit to R1.6 billion during the period.
Operating profit margin expanded to 8 percent from 6.5 percent last year due to good profit growth in cereals, maize and the international businesses.
Revenue from Essential Foods, which manufactures value-added products, declined almost 5 percent to R11.85bn in 2018 from R12.46bn a year earlier. “Although an exceptional maize recovery supported year-on-year profit improvement, the milling and baking segments of Essential Foods came under further pressure in the second semester through intensified competition, consumer down-trading within basic staple categories and increased cost pressure related to a weakening currency,” Carstens said.
Maize meal was a case in point, with White Star trading at an all-time high price premium to other brands in the category in the last quarter. Maize deflated 22 percent in the period under review.
The snacking category recorded negative volume growth and lower profits, primarily from dried fruit and rusks. Premier brands including Liqui Fruit, Ceres and Fruitree all gained market share, while Weet-Bix maintained its foothold. International revenue rose to R3.17bn from R2.7bn last year as the lower crop in the US and Turkey meant higher demand for dried fruit from the group as well as higher US dollar prices.
Other highlights included the 3 percent jump in revenue to R20.2bn while volumes were 4 percent higher. The final dividend declared remained unchanged to last year at 260 cents a share, bringing the total in 2018 to 365c a share, the same as in 2017.
Earnings per share increased 47 percent to 575c from 390c in 2017, while headline earnings a share increased 33 percent to 545c from 410c.
Last year Pioneer Foods said it would acquire the outstanding 50.1 percent of Heinz SA for R50 million, making the company its wholly owned subsidiary.
Carstens said the integration of the Heinz Foods SA portfolio within the group was well advanced.
The group acquired a 100 percent stake in The Good Carb Food Company, a UK-based granola manufacturer and owner of the well-known Lizi’s brand, for R264m last December.
Profit before income tax increased by 50 percent to R1.476 billion.