Pioneer Food Group today, Monday 6 December 2010, reported diluted headline earnings per share of 131.2 cents for the year ended September, down from 349.8 cents a year ago. No final dividend was declared.
Operating profit declined to R742.7 million from R1.092 billion a year ago and revenue was 3% lower at R15.73 billion.
Pioneer MD Andre Hanekom said sales momentum for the year slowed in value terms as deflationary pressures persisted though volumes improved almost across the range.
All products other than beverages are at substantially lower selling prices at year-end than the previous year, he said.
"Recent grain supply shortages and other cost pressures are fuelling inflation with average selling prices increasing after year-end," he said.
Adjusted operating profit, before items of a capital nature, was up 21% to R1.4 billion, while adjusted headline earnings went up 43% to R891 million.
Largely sustained sales volumes, boosted by growth in key categories such as wheaten products and Weet-Bix, provided some relief.
Penalty impact
Headline earnings were severely impacted by R654 million a penalty of R196 million paid in the bread matter and an accrual of R458 million for settlement with the Competition Commission in the flour and other matters.
These penalties resulted in a decline in headline earnings of 62% to R236 million.
Headline earnings per share declined by 62% to 134 cents per share, while adjusted headline earnings increased by 43% to R891 million, if all penalties relating to the Commission matter are excluded, translating to an adjusted headline earnings per share of 503 cents.
Cash profit of R1.610 billion and a further unlocking of R95 million from working capital contributed to improved average net debt levels.
Net interest-bearing debt at year-end amounted to R406 million and represents 9% of equity.
The Sasko business achieved a "sound" overall performance, posting an improved profit contribution and operating profit margin.
"The business benefited from the continued decline in soft commodity pricing as well as the strengthening of the rand. Volumes sold remained satisfactory across the range of products," the food group said.
Consumption
Total industry consumption of white maize on an annualised basis continued to retract from the peak reached during the previous financial year, although it was still markedly higher than the long-term consumption trend, the producer of White Star Maize meal said.
Total industry wheat consumption conversely recovered from the recent downward trend and appears to be re-aligning to the longer-term volume growth trend.
Total rice and legume sales volumes sustained its growth momentum with a continued sound performance of the Spekko rice brand. Sourcing options remained limited with the Indian export embargo for non-basmati rice remaining in place, it said.
The bakery business maintained its satisfactory performance on a sustained volume base.
"Likewise, the pasta business posted sound results although the competitive environment was impacted by an increase in the level of imported products supported by the strength of the rand," the group said.
Profit contributors
The Agri business benefited from lower raw material prices compared to the previous year.
"This, as well as a marked improvement in on-farm production, contributed to the increase in profits. The prices of the major raw materials, maize and soya, declined, giving Nova Feeds the opportunity to reduce selling prices. This resulted in a decrease in revenue, but volumes increased compared to 2009," it said.
Considerable improvement in the overall business performance of the Bokomo Foods segment was achieved. With the exception of dried fruit, the profitability of all categories improved.
Although volumes were up marginally, the improved profitability was mainly the result of improved efficiencies, strict cost control and better price realisations in certain categories.
Beverage boost
The beverages segment revenue increased, with sales volumes slightly up for the total business. The increase in profitability was driven by increased production and distribution efficiencies as well as effective cost management for the period.
In its outlook, the group said performance for the new year is expected to be influenced by the gradual upward trend in raw material prices, cost increase above inflation for instance salaries and wages, electricity and transport.
The performance will also be influenced by the sustainability of sales volumes given shifting consumer spending patterns and inflationary pressures on selling prices.
