Pioneer Foods reports 11.5% growth in half-year revenues to US$768.43m

SOUTH AFRICA – Pioneer Foods, South Africa’s largest food producer, has reported a 11.5% growth in revenues to US$768.43 million (R11.039bn) during its half year results for the period ended 31st March 2019.

The company said the growth was majorly driven by growth in bread, wheat, rice, beverages, cereals and sausage rolls in Nigeria, reports Reuters.

However, despite the growth in revenues, the food and beverage producer plunged into 15% decline in adjusted headline earnings per share (Heps), a main profit metric used in South Africa, to US$35.09 million (R506m).

As the food and beverage industry continues to struggle with higher costs and cash-strapped consumers, the company also highlighted maize shortages in the country as a major contributor to the dismal perfomance.

The Sasko breads and Ceres juices producer said it was unable to counter the shortfall.

“The year-on-year regression in the performance of the maize category, off the strong comparative period base, was more than expected, given sustained selling price deflation despite raw material cost inflation and a weaker milling performance,” the company said.

Pioneer warned that margins would remain under pressure as its ability to pass on higher input costs would be constrained by lower consumer demand and “retailer competitive intensity”.

While the firm lifted selling prices in some of its categories, inflation was not enough to cover increases in raw-material and operating costs.

Operating profits from the firm’s groceries business declined 41% to US$11.86 million (R171m) while the group said sales volumes were 2.7% higher in the six-month period.

Excluding the recently acquired Wellingtons and Lizi’s businesses, revenue grew 7.9% with volumes up 1.3%.

“This represents a credible top-line performance in the significantly constrained local consumer market with consequent competitive pressures,” Pioneer said.

Economic analyst, Lester Davids, points out that consumers were shifting from branded products to cheaper alternatives, while economic policy uncertainty and stubbornly high unemployment has limited household spending.

According to a Business Day report SA’s consumers have been hit hard with the country’s economy falling into recession in 2018 characterised by higher unemployment rates, high fuel prices, while an increase in the VAT rate has further added pressure.

Despite reporting lower earnings, Pioneer kept its interim gross dividend unchanged at R1.05 (US$0.073) per ordinary share.

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