PIONEER Food Group’s full-year headline earnings per share (HEPS) rose 5% after adjustments to exclude the effects of an empowerment deal, with revenue up 10% while volumes fell 5%.
Adjusted HEPS were 426c in the year to September, while headline earnings including the empowerment deal fell 17% to R606m.
Selling prices grew 15% on average from the year before, with price increases damping consumers’ spending on bread, maize, wheaten products and fruit juices.
In its results presentation, Pioneer noted that the food basket for the poorest 30% in South Africa increased from 35% of average monthly income in July 2011 to 37.8% in July 2012.
Consumers have also been hit by increased electricity and transport costs, which has affected food-buying patterns.
Pioneer’s Sasko division — which consists of Sasko Grain, Sasko Bakeries, Sasko Pasta, and Sasko Strategic Services — saw an improvement on the previous year but its performance still fell short of targets. Revenue of R10bn was up 10% but operating profit rose 8% to R948m, as the operating margin narrowed to 9.5% from 9.7%, affected also by higher operating costs and promotional spending.
Pioneer said sales of wheat, maize and bread were affected by higher prices after the US drought, with rice benefiting from changing buying patterns and cheap imports. Total full-year bread volumes fell 4%, after a nearly 8% drop in the first half.
Wheat, maize and bread prices improved in the last quarter, though, with record wheat sales seen.
Pioneer did not expect South African wheat production to "reach self-sufficient levels" as plantings had fallen dramatically.
The higher grain prices also affected Pioneer’s agri business division, which posted a net operating loss of R49m despite revenue rising 12% to just over R3m. In the broiler and egg operations, rising raw material costs were made worse by an oversupply of products, with frozen imports affecting broilers in particular.
Bokomo Foods fared better, posting an 18% rise in operating profit to R264m on revenue up 11% at just over R3bn as the operating profit margin improved from 8.1% to 8.6%. Increased exports to other African countries were cited as a factor in Bokomo’s performance.
Ceres Beverages had to contend with "exceptional increases in raw material input", with the operating margin shrinking to 3.2% from 5.3% as pressure on consumers meant the cost increases could not be passed on.
Looking ahead, the company said in its presentation that consumer spending remained constrained by pressure on disposable income.
There could be some relief in a possible fall in raw materials prices as supplies pick up in the months ahead.
However, Pioneer said it would be vital to grow sales volumes at prices consumers were able to pay.
The company would also focus on cost management and efficiency drives, and on protecting operating margins.