Shake-up spooks the mar­ket

As the food group faces a tough sec­ond half, un­cer­tainty around the CEO’S sud­den res­ig­na­tion has also taken a toll

Financial Mail - - MONEY&INVESTING - Stafford Thomas thomass@fm.co.za Phil Roux

To say the news that Phil Roux will va­cate his po­si­tion as Pi­o­neer Foods group CEO at the end of the month caught the mar­ket com­pletely off guard would be an un­der­state­ment.

It sent the food group’s price crash­ing and pro­vided a field day for ru­mour-mon­gers. They con­trived a myr­iad pos­si­ble rea­sons and, in the process, cre­ated what is a po­ten­tially out­stand­ing op­por­tu­nity to buy Pi­o­neer stock.

Some asked whether Roux, the highly re­spected CEO since April 2013, had been given the boot by the board. Or was there an im­passe on strat­egy be­tween Roux and the board, which

Pi­o­neer

is heav­ily in­flu­enced by PSG? PSG’S in­flu­ence is through its 34.6% in Zeder, which has a 27% stake in Pi­o­neer.

There are sound rea­sons to sup­port both pos­si­bil­i­ties.

For one, Pi­o­neer’s head­line EPS, hit by losses on maize fu­tures, slumped 56% in the six months to March. The same or worse is set to come in the sec­ond half.

The other pos­si­bil­ity was a fall­out with PSG over what, in March, had been termed a “ma­te­rial [off­shore] trans­ac­tion” that Roux had been pur­su­ing. Ne­go­ti­a­tions were called off in May.

“I be­lieve PSG blocked the deal,” says a fund man­ager who re­quested anonymity.

What­ever the rea­son, news of Roux’s im­mi­nent de­par­ture sparked ag­gres­sive sell­ing, driv­ing Pi­o­neer’s share price 15% lower in the week af­ter his Septem­ber 1 res­ig­na­tion an­nounce­ment.

“The mar­ket has se­ri­ously lost the plot,” says Warren Jervis, man­ager of the Old Mu­tual Mid and Small-cap fund. “I am us­ing the price set­back to buy Pi­o­neer.”

Roux pours wa­ter on the as­per­sions: “I am sorry to tell those who be­lieve oth­er­wise, but there are no spooks or sen­sa­tional rev­e­la­tions in my res­ig­na­tion.

“That I had a fall-out with the board is just so much BS. My res­ig­na­tion is en­tirely my own de­ci­sion.”

Of the aborted po­ten­tial off­shore deal, which Roux re­veals was with a US group, he says he had worked on it for 10 months with the full sup­port of Pi­o­neer’s board.

The US group walked away from the deal be­cause it got scared of what it saw hap­pen­ing in SA, says Roux.

There has been spec­u­la­tion that the group was Pep­sico.

Zeder CEO Nor­man Cel­liers puts any doubts that may still ex­ist about Roux’s de­par­ture firmly to rest.

“[Roux] has done a great job,” says Cel­liers. “There are def­i­nitely no ill feel­ings be­tween us. There is noth­ing more to read into it.”

Roux ex­plains that the real rea­son for his res­ig­na­tion is “quite sim­ple”. With the huge trans­for­ma­tion of Pi­o­neer, which he has driven re­lent­lessly, and what he calls “a year from bloody hell” be­hind him, he says he is worn out and needs to step back and take a break.

He is not sev­er­ing his ties with Pi­o­neer com­pletely, and will serve as strate­gic ad­viser to the group un­til Novem­ber 2019.

Roux says his biggest re­gret is that he would have pre­ferred to leave Pi­o­neer next year. “But the board de­cided it wanted to get all the bad news out of the way this fi­nan­cial year,” he says.

On the re­sults front, it will be re­ally bad news. Be­yond stalling sales vol­umes and mar­gin pres­sure, the sec­ond half of the year will also bring with it the fi­nal wind­ing down of maize fu­tures con­tracts that were bought at a time when drought fears had driven the maize price sky high.

The fu­tures losses will be sub­stan­tial, says Roux. But they will be a one-off cost.

Con­fi­dently, in­com­ing Pi­o­neer CEO Ter­tius Carstens says: “The com­pany will be back on track in the 2018 fi­nan­cial year.”

The mar­ket’s neg­a­tive reaction to Roux’s res­ig­na­tion is all the more strange given the depth of ex­pe­ri­ence Carstens brings with him. A 23-year vet­eran with Pi­o­neer, Carstens cur­rently heads the group’s biggest di­vi­sion, Es­sen­tial Foods.

“The tran­si­tion from me to [Carstens] will be com­pletely seam­less,” says Roux. “It will be busi­ness as usual.”

In a big vote of con­fi­dence in Pi­o­neer’s fu­ture, Roux bought al­most R1m of Pi­o­neer shares in the days fol­low­ing his res­ig­na­tion an­nounce­ment. He was joined by CFO Felix Lom­bard, who scooped up R916,000 of Pi­o­neer shares in the same week.

Jervis wel­comes Carstens’ ap­point­ment, say­ing: “He knows the busi­ness in­side out.”

Roux him­self is now look­ing for­ward to a well-earned break. But it will not be per­ma­nent re­tire­ment.

“I am only 52 and still have lot of tread on my tyres,” he says. “But I am not sure I will want to be CEO of a large com­pany again. I may take po­si­tions on some boards, go into pri­vate eq­uity or even do some teach­ing. I have yet to de­cide.”

What­ever di­rec­tion Roux opts to take, it is un­likely that we have heard the last of him.

I am sorry to tell those who be­lieve oth­er­wise, but there are no spooks or sen­sa­tional rev­e­la­tions in my res­ig­na­tion . . . [It] is en­tirely my own de­ci­sion Phil Roux

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