Coronation raises its stake in Pioneer Foods above 5%

DURBAN – Coronation Fund Managers’ subsidiary, Coronation Asset Management, yesterday announced that it had increased its interest in Pioneer Foods to 5.15percent.

Pioneer Foods said it had received notification that Coronation Asset Management had increased the beneficial stake on behalf of Coronation Fund Managers to take its total shareholding beyond 5percent.

A source close to Pioneer Foods said it was not the company’s policy to comment on the investments in the group.

“Coronation added to an existing holding in Pioneer Foods on behalf of clients that now amounts to 5.15percent of the total issued ordinary share capital of Pioneer Foods and triggers this notification to the market, having breached 5percent.

“Adding to a holding is a sign of confidence in the investee company,” the source said. “The portfolio managers at Coronation decided to add to their holding based on their analysis of the company and its prospects.”

Ian Cruickshanks, chief economist at the SA Institute of Race Relations, said Coronation took a long-term view on Pioneer Foods, as food comprises a major part of their expenditure, particularly from the poor consumers. Cruickshanks said the move was a vote of confidence in Pioneer Foods’ direction.

Pioneer Foods share price has since declined from R145 a share in January, but the company has increased its acquisition spree.

Last week the group released an impressive set of results for the six months to end-March, recording a 12percent increase in gross profit to R2.9billion, mainly as a result of volume growth and the normalisation of the maize procurement position. The group said its results were from a low base, after recovering from a drought a year earlier.

Profit before income tax, after finance costs, increased by 38percent to R896.5million, while earnings per share increased by 34percent to 332.5cents, and headline earnings per share increased by 30percent to 317.1c a share.

Pioneer Foods also said that its latest acquisition, Heinz Foods, was expected to bring healthy returns and boost its turnover by R600m in the next financial year. Chief executive Tertius Carstens said the group was looking forward to the development of the portfolio that included a range of number one or two brands in their respective categories. He said the business performance should improve materially when integrated into Pioneer Foods.

Cruickshanks said the company offered opportunities for potential investors to increase their shareholding as the stock was likely to bounce back. He said prospects for the company had improved in the past few months. “Coronation has picked up the shares at lower value and food will continue to form part of the consumers’ expenditure,” he said.

Coronation Fund Managers shares rose 1.35percent on the JSE yesterday to close at R62.51.