Pioneer feels drought’s heat on earnings
Pioneer Foods has said that the country’s drought was weighing on earnings as soaring grain prices hit volumes and margins at the secondbiggest food maker.
The company’s input costs for maize-based products rose 74% during the four months through January, while wheat import tariffs were almost six times higher at R911 per ton, the company said on Friday.
South Africa’s largest food producers, including Pioneer and Tiger Brands, are struggling after the lowest rainfall in South Africa since 1904, which has resulted in the local prices of key staples such as white maize more than doubling since the beginning of last year. Price increases are exacerbated by rising import costs, with the rand losing 28% against the dollar since the start of last year – the worst performer among 16 major currencies tracked by Bloomberg after Brazil.
Pioneer said: “Rand weakness and the concomitant cost-push effect will accelerate inflationary pressure on food manufacturers and increase the burden on consumers. Managing volume and margin imperatives becomes a delicate balance.” While the group’s sales rose 8% during the period, earnings growth would be “muted”, Pioneer said.