Pioneer lists with R1,2bn capex planned

At first trade yesterday, the food and beverage manufacturer's share was at R32,75 for 15 shares traded. By mid-morning, the share was trading at R34, with 29 deals having taken place. Pioneer closed at R35.

On Monday, the day before listing, Pioneer's over-the counter shares were trading at R32,50.

Trade in the security is expected to be slow, as five groups and the remainder hold 70% of the shares by farmers and institutions that have no incentive to sell their stakes.

The company has listed faster than the market expected, leaving shareholders holding certificates that must be dematerialised before they can be traded, which could take two weeks.

Financial director Leon Cronje said the company's biggest challenge before listing had been to explain this to shareholders, and this would slow trade initially.

Market commentators expect the shares to remain illiquid while the market grapples with valuing the company, a process that could take six months.

In addition, the company is under margin pressure and is not expected to see any relief until the second half of the year.

However, by the middle of next year the group's planned capital expansion programme should start filtering through and earnings should pick up, commentators said. By then, interest rates may have eased and investors might be more confident, boding well for the share price.

Pioneer's R1,2bn capital expansion programme will be partly funded by its R500m rights offer next month. While the capital will be spent across the board, the initial focus will be on expansions in the baking and milling, cereal and Pepsi businesses to meet food demand and to allow for future efficiencies.

Shareholders could not trade after May 16 if they wanted to be eligible for the rights offering, Cronje said.

MD Andre Hanekom said the listing was “the logical next step in our growth strategy. We've built a significant diversified food and beverage manufacturer since we merged the Sasko and Bokomo businesses in 1997.”

The group hoped to broaden its reach and position the company for long-term growth.

Source: Business Day

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