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Pioneer Foods earnings rose as much as 32%.
Pioneer Foods earnings rose as much as 32%.

Pioneer expects solid recovery from last year’s torrid first half

RETAILER NEWS

By Andries Mahlangu - Apr 19th 2018, 11:35

Earnings rose as much as 32%, and although revenue dipped, sales volumes rose and market share of some if its main brands either grew or was stable. 

Pioneer Foods expects a much better first-half performance than last year, when it was affected by an unfavourable maize procurement position taken in 2016, when SA was in the grip of a devastating drought.

Adjusted headline earnings per share (HEPS) — which include the effect of an empowerment transaction — are expected to rise by between 22% and 32% in the six months to end-March 2018, compared with the year-earlier period, it said in a trading update.

Adjusted HEPS fell 47% in the first half of 2017.

The 2016 maize procurement position was taken to ensure supply through the drought.

But the situation has normalised since then, with SA harvesting a record maize crop in 2017, and grain prices dropping as a result, leading to lower input costs for food producers.

Pioneer had said in its 2017 interim results statement that the "margin drag on maize" would cease from June 2017.

The company said in its Sens statement that group turnover fell 2.8% to R9.9bn, largely due to deflation in soft commodities — maize, wheaten products and rice — but total volumes rose 4.3%.

"Improved sales volumes and the normalisation of the raw material procurement position resulted in a sound recovery in maize profitability, with White Star [maize meal brand] restoring its market share in a growing category," the company said.

"This improvement was partially offset by a regression in the wheaten value chain performance, with flour and bread seeing margin compression in the face of weaker demand and a more competitive environment."

Pioneer Foods competes with Tiger Brands and AVI for space on supermarket shelves, among other players.

"Cereals, long-life fruit juice, accompaniments and baking aids performed well from a volume and operating profit point of view," Pioneer said.

But sales volumes and profitability declined in the snacking category.

Liqui-Fruit gained share while Weet-Bix and Safari maintained their share.

"Long-life fruit juice and dried fruit export volumes and margins recovered in line with expectation and posted an improvement on 2017 profitability," the company said.

But margins in the international operations continued to be affected by the stronger rand, it said.
© BusinessLIVE MMXVIII 

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