Western Cape Business News

Send  Share  RSS  Twitter  24 Jun 2009

FOOD: Pioneer Enjoys A Staple Diet


Recent Western Cape Business News

WHILE Pioneer Foods has done its level best in recent years to build a diversified brands business to rival market leaders like Tiger Brands and AVI, the Paarl-based food giant is still relying heavily on its traditional staple food strengths.

In the half year to end February Pioneer’s milling division Sasko was the star performer with cereals business Bokomo providing a solid underpin.

Sasko managed a 23% hike in turnover to R4.47 billion with MD Andre Hanekom reporting that White Star super maize meal products achieved excellent sales volume growth at firm prices.

This more than offset maintained bread sales volumes and lower sales volumes in wheat products, pasta and rice.

The most encouraging part of Sasko’s performance was the fatter 8.2% trading margin (previously only 5%) – a level Hanekom believes can be sustained ‘if current circumstances prevail’.

Sasko’s operating profit nearly doubled to R365 million – but this was off a low base last year when the division was impacted by delayed price increases and once-off commissioning costs at two bakeries.

Bokomo did not see the same spectacular top line growth as Sasko. But the cereals division managed to push up sales 9% to R1.3 billion with operating profits up 7% to R126 million – which Hanekon says confirms a remaining lag in cost recovery.

He says sales volumes of breakfast cereal products were maintained at acceptable levels.

Pioneer should benefit from additional capacity in the new financial year as the company’s new Weet-Bix facility is expected to be commissioned by September this year at a cost of R130 million.

Hanekom says the Heinz Foods (SA) joint venture – also part of the cereals business - performed satisfactorily.

Capacity constraints in Heinz’s Western Cape-based facility will be addressed after a frozen food facility was acquired in Gauteng in February this year. The facility should also allow cost savings in distribution.

Pioneer’s Agri Business segment – which is anchored by the Western Cape based broiler business, Tydstroom, increased revenue by 10% to R1.3 billion. But operating profits were a lacklustre R41 million after a turnaround in the egg business was offset by a disappointing performance from Tydstroom.

Hanekom says tough trading conditions in the broiler business prevented a proper recovery of increased costs at Tydstroom. No profit contribution from the broiler business is expected in the current financial year.

Overall, though, Hanekom says Pioneer should continue its profitable trend until year end at the end of August.

But he stresses performance depends on sales volumes from maize meal products to remain at full production capacity and sales volumes from bread to be sustained.

Pioneer is also counting on sales volumes from wheat products to improve as well as a much improved performance from the egg business.

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