Pioneer Foods sees golden future

DURBAN – Listed food and beverages company Pioneer Foods has said that its latest Heinz Foods SA acquisition was expected to bring healthy returns and boost its turnover by R600million in the next financial year.

Chief executive Tertius Carstens said the group wanted to consolidate the acquisition. “By acquiring full ownership of Heinz Foods SA, we look forward to the development of the portfolio that includes a range of a number one or two brands in their respective categories,” Carstens said.

Pioneer Foods received regulatory approval for the acquisition this month, with certain contractual conditions still outstanding. The group anticipated that the conditions would be finalised before the end of the month.

Carstens said management was confident that this business performance should improve materially when integrated into Pioneer Foods.

In the results for the six months to end March, the group reported 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’s results were from a low base, after recovering from a drought a year earlier.

The 2017 results were affected by an unfavourable maize procurement position, taken by the group in 2016, to ensure supply throughout the drought. “The drought is behind us, but we have put plans in place should the Western Cape be affected by Day Zero,” Carstens said.

Profit before income tax, after finance costs, increased 38percent to R896.5m, while earnings per share increased by 34percent to 332.5cents and headline earnings per share increased by 30percent to 317.1c a share. Revenue declined by 3percent to R9.90billion, due to price deflation in some commodities, including maize, wheat and rice. However, its total sales volumes rose 4percent.

The Essential Foods division achieved 70percent operating profit growth through a strong maize performance as well as pasta and rice profit expansion. Improved sales volumes and the normalisation of the raw material procurement position supported the sound recovery in maize profitability. White Star benefited from general category growth and has retained its market leading position, the group said.

In the groceries division, revenue was up by 9percent to R2.65bn, as food top-line growth was driven by volume growth, restored market share in key categories, in some instances at lower price points to maintain competitiveness that compressed profit and margins for the period. Cereals, long-life fruit juice, baking aids and desserts performed well from a volume and operating profit point of view. The snacking category recorded negative volume growth and consequently a decline in profitability.

International business revenue increased by 10percent to R1.42bn. The group declared a dividend of 105c a share.

Pioneer Foods declined 1.01percent on the JSE yesterday to close at R104.36.

– BUSINESS REPORT