Drought, higher grain prices cut earnings

PIONEER Foods pointed to a “confluence of various inhibitors” as profitability for the first half of the financial year ended March 31 materially declined, with the headline earnings per share (HEPS) declining 47% to 253 cents per share.

The owners of Sasko bread, White Star Super Maize Meal, Weetbix, Liqui-Fruit and many other brands, said the most sig- nificant detractor was maize – due to the unfavourable procurement position taken in 2016.

However, the group said the margin drag on maize was expected to cease from June as lower cost raw material comes into effect.

Pioneer Foods said international business was severely impacted by a raisin crop shortfall, African exports and a stronger rand.

Profit contraction was the most severe in this division because of lower export beverage volumes and margins as a result of currency devaluation in key markets, placing pressure on the Ceres value proposition in market.

Breakfast cereals, also affected by cost push inflation and competition, managed to increase profitability.

Pioneer Foods’ group turnover increased by only 2%, with the South African business increasing turnover by 4% and international declining 11%.

The food maker said the cost of goods sold increased by 10% due to significant raw material cost push, resulting in gross profit decreasing by 16% to R2.6 billion and the gross profit margin compressed from 31% to 26%.

Notwithstanding a constrained trading environment in South Africa, Pioneer Foods said it anticipated an improvement in performance in the second half of the financial year. – African News Agency