SOUTH AFRICA – Consumer brands giant Pioneer Foods believes new investment in its bakery division could unlock value in the 2016 financial year.
Writing in the company’s just-released annual report, CEO Phil Roux said Pioneer’s short-term priority would be to continue outperforming the industry by focusing on generating profitable top-line growth in a constrained market.
Pioneer is controlled by PSG-aligned agri-business investor Zeder and owns household brands including Sasko, Weet-bix, Bokomo, Ceres, Liqui-Fruit, ProNutro, Marmite, Bovril and Peck’s Anchovette.
The company generated revenue of about R19bn in the year to end-September 2015.
Mr Roux said the company would keep investing in additional capacity where there was a solid investment case. “We believe in fastidious management of fixed-capital allocations.”
He said the next financial year’s capital investments would create further capacity in Weet-bix and the company’s bakeries. “We are confident in the growth potential to deliver the required returns.”
Ensuring sustainable growth for Pioneer’s core essential foods division depended on significant, strategic capital investment decisions, he said. “These projects typically have a multiyear horizon from the investment decision to full production.”
Mr Roux thought Pioneer’s best opportunity to unlock value was in the bakeries segment. “Excellent progress has been made … with further growth and improvement opportunities ahead.”
Pioneer allocated R105m to the replacement and upgrading of the Epping bakery, which would be completed in 2016, he said.
In the next financial year, the division would start a R330m replacement and capacity expansion of the Aeroton bakery in Gauteng.
“This will further enhance manufacturing and distribution efficiency in support of future growth in key markets.”
Mr Roux estimated the Aeroton expansion would be completed in 2017.