FOOD: Pioneer Is Blossoming
Recent Western Cape Business News
Cape-based Pioneer Foods reports revenue increased by 20% to R8.4 billion for the six months to 31 March 2009 largely from increased sales prices compared to last year.
The Group’s operating profit margin improved from 5.7% to 6.6% with operating profit improving by 39% to R549 million for the six months under review.
Cash profit from operating activities improved by 32% to R711 million and headline earnings by 34% to R297 million. Headline earnings per share increased by 18% to 170 cents per share with the weighted average number of shares in issue increasing by 20.3 million, mainly from the issue of 20 million shares in June 2008 following the rights offer.
Decreasing inflation since September 2008 limited the investment in working capital to R154 million compared to R604 million in the comparative period.
Fixed capital expenditure amounted to R198 million and was curtailed to essential additions and replacements given the uncertain economic outlook.
Group debt decreased by R41 million since September 2008 to R1,414 million which equates to 32% of equity.
The Sasko segment achieved pleasing results. White Star super maize meal products achieved excellent sales volume growth at firm prices. Bread sales volumes were largely maintained and sales volumes of wheaten products, pasta and rice were lower.
Revenue increased by 23% to R4,469 million mainly as a result of increased sales prices to recover the substantially increased cost base of 2008. The operating profit margin improved to 8.2% as a result and can be sustained if current circumstances prevail.
Operating profit improved to R365 million from a low base last year impacted by delayed price increases and once off commissioning costs at the Bloemfontein and Port Elizabeth bakeries.
The Krugersdorp wheat mill capacity increase and efficiency upgrade was successfully completed at a cost of R85 million during the period under review.
The Agri Business segment increased revenue by 10% to R1,342 million and operating profit by 8% to R41 million. The egg business delivered a significant turnaround weighed down by a disappointing performance from the broiler business.
Tough trading conditions in the broiler business prevented a proper recovery of increased costs. Certain on-farm performances were disappointing and are being addressed. The animal feed business performed satisfactorily.
Revenue from the Bokomo Foods segment increased by 9% to R1,334 million. Operating profit increased by 7% to R126 million with the operating profit margin slightly down to 9.5% from 9.7%, confirming a remaining lag in cost recovery.
Sales volumes of breakfast cereal products were maintained at acceptable levels in the difficult economic climate. The new Weet-Bix facility is expected to be commissioned by September 2009 at a cost of R130 million.
The Heinz Foods (SA) joint venture performed satisfactorily. It acquired a frozen food facility in Gauteng in February 2009. This acquisition will address the capacity constraints of the current Western Cape based facility and should enable cost savings in distribution.
The Ceres Beverage segment performed well, specifically in the export business that benefited from good volume growth and the weaker rand in the period under review.
Double-digit growth in sales volumes from the Pepsi venture further contributed to a 23% growth in revenue from this business segment to R1,357 million for the reporting period. The operating profit margin improved slightly from 5.9% to 6.0% and operating profit increased by 24% to R81 million.
The business of Ceres Spring Water was acquired in November 2008 to enter the fast growing water category.
A more stable food price environment is expected to contribute to an improved operational performance for the full year, though upward cost pressures persist.
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