Pioneer Foods posts 3% dip in turnover as maize recovers from drought

SOUTH AFRICA – Pioneer Foods, the maker of Sasko and Veet-Bix brands has reported a 3% marginal decrease in group turnover to US$784.22 million from US$807.78 million attributed to price deflation in soft commodities that weakened price realisations, principally in maize and to a lesser extent, wheat and rice.

For the six months ended 31 March 2018, the firm recorded significant growth in margin and volume compared to the same period the previous year.

As a result of volume growth and the normalisation of the maize procurement position, gross profit increased by 12% to US$230.18 million pushing the growth profit margin from 25.7% to 29.6%.

Operating profit increased by 36% to US$75.36 million while total sales volumes were 4% higher said to be as a result of thoughtful management of relative price points that also supported market share growth.

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Performance for the Essential Foods category was boosted by improvement in maize even as the company recovers from drought but this was partially offset by a regression in the wheaten value chain performance.

“The business achieved 70% operating profit growth through a strong maize performance as well as pasta and rice profit expansion.

Improved sales volumes and the normalisation of the raw material procurement position supported the sound recovery in maize profitability.

White Star benefited from general category growth and has retained its market leading position,” said a statement from the company.

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Groceries had top-line growth driven by volume growth, restored market share in key categories such as cereals, long-life fruit juice, baking aids and desserts but negative performance and a shrinking value in snacking categories, dilutables and ice tea categories weighed down profitability.

Export commodities such as long-life fruit juice and dried fruit recorded lower margins comparable to 2016 due to stronger rand and unfavourable trading environment particularly in Zimbabwe and the strengthening of the exchange rate from fruit procurement to time of export.

Pioneer Foods said the financial results were impacted by the acquisition of Heinz Foods SA which was granted on 9 May 2018, with certain contractual conditions still outstanding.

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While the acquisition is expected to be finalized end of May, effective 1 June 2018, the group said it is well positioned to deliver sustained volume and improved value growth while maintaining a firm handle on costs and efficiencies, all leading to an improved year ahead.

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