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The group restored market share in some key categories, but in some cases paid for it with margin squeeze.
The group restored market share in some key categories, but in some cases paid for it with margin squeeze.

Pioneer Foods puts drought behind it


By Andries Mahlangu - May 21st 2018, 09:42

Pioneer Foods enjoyed an improved performance in the six months to March, helped in part by a low base created in the year-earlier period when it was still dealing with the effects of the drought.

Headline earnings per share (HEPS) rose 30% to R3.17, Pioneer said on Monday, as earnings from essential foods as well as international businesses recovered from last year’s slump.

Operating profit in the essential foods division leapt 70% to R561m, even though revenue in the segment dropped 10% to R5.82bn.

A strong performance from maize, as well as higher profits from pasta and rice, supported essential foods. The White Star maize brand, in particular, benefited from lower raw material costs.

The 2017 results were adversely affected by an unfavourable maize procurement position taken in 2016 to ensure supply throughout the drought. Pioneer said in its 2017 interim results statement that the "margin drag on maize" would cease from June 2017.

A record maize crop in 2017 ensured prices fell, leading to lower input costs for food producers.

Last Monday’s results showed operating profit in the grocery segment dropped 3% to R292m, despite revenue growing 9% to R2.6bn.

In groceries, the group said it "restored market share in key categories", though in some cases the price for this was lower profits and smaller margins. "Operating costs overall were tightly managed," it said.

Operating profit in the international division rose 75% to R121m, off revenue of R1.4bn, which was up 10% on 2017.

Group total sales volumes grew 4%, outstripping revenue, which fell 3% to R9.9bn, due to price deflation in some commodities, notably maize, wheat and rice.

Group net profit rose to R622.2m, from R459.6m a year ago.

The company kept its interim dividend steady at R1.05 per share.


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