Pioneer Foods' revenue on a steady rise in last 4 months

Published Feb 18, 2019

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DURBAN – Pioneer Foods' revenue rose 7.8 percent in the four months to end January from higher price inflation in bread, wheat flour, rice and export fruit.

The group said in a trading statement on Friday that its increased volume growth in local beverages, bread, rice and breakfast cereals in the UK also contributed to the increase.

It said the revenue growth excluded the contribution of the acquired Wellington’s and Lizi’s businesses.

Overall like-for-like volumes grew 2 percent, excluding the contribution of the acquired businesses, implying basket inflation of 5.8 percent.

Pioneer Foods said the positive growth was, however, negated by the major cost inflation as evident in key raw material pricing and other operational input costs.

“Consumer demand remains under pressure, with spending muted and not expected to improve in the near future. As a result, pressure on gross and operating margins will continue, to the extent that price recovery lags.”

Pioneer Foods’ brands include Sasko, Weet-Bix, Liqui-Fruit, Ceres and Safari, with divisions such as essential foods, groceries and international business.

In the essential foods division, the wheaten value chain performed to expectations, supported by excellent volume growth from bread, as well as bread and wheat flour inflation.

“The maize category posted negative volume growth and only marginal inflation year-to-date, notwithstanding further raw material cost pressure, compared to the exceptional prior year performance,” the group said.

The balance of the essential foods basket, with the exception of pasta, delivered sound revenue and volume improvement compared to last year.

“The pasta category remains exposed to the growing share of lower-priced imports,” the group added.

In the groceries division, the long-life fruit juice category recorded strong volume and value growth.

The group said the volume performance of cereals was flat compared to the previous year, after particularly strong volume growth last year.

“The balance of the groceries basket had a more challenging time, with volumes flat or marginally down compared to last year,” the group said. “The recovery of volumes in condiments and frozen foods is pleasing, after the integration of the Wellington’s business into the groceries division.”

Pioneer Foods said exports into neighbouring countries experienced negative growth, reflecting the anaemic economic conditions. The group said only the Nigerian business performed to expectation, with the investment in expansion capital on track.

“Fruit exports, however, continue to perform well on stronger demand and strengthening international dollar pricing due to lower global availability, while the UK business has done well, despite ongoing Brexit uncertainties, with acceptable volume growth in the face of increased input cost inflation.”

Pioneer Foods shares rose 1.47 percent on the JSE on Friday to close at R81.25.

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