Pi­o­neer feels drought’s heat on earn­ings

CityPress - - Business -

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.

– Bloomberg

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