Pioneer Foods expects earnings to rise 30%

DESPITE the effect of the drought and rand volatility, Pioneer Foods said yesterday that it expected its headline earnings per share to be up between 30 percent and 40 percent for the year to end September.

Headline earnings per share would fall between 865 cents and 931c per share – higher than the 665c per share reported in 2015.

Pioneer Foods produces and distributes a range of branded food and beverage products to wholesalers, retailers and informal traders. Its brand portfolio consists of Weet-Bix, Liqui-Fruit, Ceres, Sasko, Safari, Spekko and White Star.

“The business had to contend with the severe impact of the drought on maize and other crops, exponential increase in the wheat import duty, rand volatility and resultant cost push in a weak consumer environment.

“The combined strength of the group’s brand portfolio and a sustained focus on cost management and extraction of efficiencies, assisted in mitigating the full effect of the aforementioned vagaries,” added the group.

In its half-yearly results announced in May, Pioneer Foods reported a 6 percent increase in operating profit to R1.24 billion.

Chief executive Phil Roux said at the time that the crippling drought had a negative impact on the results as maize shortages and higher prices for maize had a negative impact on the results.

The company said it also expected revenue to increase by between 9 percent and 11 percent and earnings per share from continuing operations on an adjusted basis was expected to be between 864c and 931c, or between 4 percent and 12 percent, higher than the 831c reported in 2015.

It said the 22.04 percent drop in white maize prices during the period under review would boost its profits.

Agribiz chief economist Wandile Sihlobo said white maize had dropped from R4 510 per ton at the beginning of April to around R3 516 per ton at the moment.

“It has dropped by R994 and this represents a 22 percent drop. Also the rand was trading above R15 to the dollar and now it is just below the R14 levels. So companies can report better profits if the recovery continues,” he said.

The group said it expected revenue from the rest of Africa to drop amidst severe currency devaluation to the rand and weak consumer spending power.

Pioneer Foods entered into an agreement to acquire the entire issued share capital of Streamfoods for a purchase consideration of £7.5 million (R127.52m) during the period. Streamfoods is wholly owned by the Wellness Group of companies.

Roux said the acquisition was strategic for Pioneer Foods to bolster the company’s product in the UK. The shares fell 0.08 percent to R166.27.