Pioneer Foods headline earnings/share down 11%

Revenue grew 27% to R14.9 billion, while operating profit rose to R845.7 million from R833 million.

The board approved a final dividend of 66 cents per share. This is in addition to an interim dividend of 30 cents for a total dividend of 96 cents per share - up from 93 cents a year ago.

MD André Hanekom MD said the year under review was characterised by significant pressure on key operating costs and volatile commodity prices in a challenging operating environment where the consumer's discretionary income became more constrained.

"We managed to achieve good volume growth in key product categories and increased final product prices but failed to fully recover steeply rising input costs as indicated by our declining profit margin," he said.

Headline earnings declined mainly as a result of significantly higher finance costs to fund increased fixed and working capital spend. Looking ahead the group remains optimistic about the short and longer term growth potential of Pioneer Foods.

A number of factors will determine the speed and magnitude of earnings growth. The potential turnaround in the egg and broiler businesses, the contribution potential from the Pepsi venture and the optimisation of profitability of the Bokomo Foods division are of particular interest. A sustained solid performance from the milling and baking businesses is also key to future earnings growth.

The significant decline in international and local wheat prices during the last quarter of the year under review is expected to contribute to lower food inflation in the group's basket of products in the current year. This will positively affect earnings while limiting further increases in working capital.

Debt however is expected to largely remain at current levels, it added.

"Capacity expansion programmes in the baking, milling, cereals and Pepsi businesses are addressing production shortfalls caused by rising demand. We are confident in the inherent strength of our product basket and its development potential to expect margins to improve over time as operating costs stabilise and inflation subsides," Hanekom said.

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