HEAVY input costs and tightened consumer spending continued to afflict Pioneer Food Group’s earnings for the year to September, the company said on Monday.
The group, whose brands include Bovril and Weetbix, was also hit by a R161m one-off non-cash-flow cost relating to the implementation of the second phase of an empowerment transaction.
Diluted headline earnings fell from 339.7c to 331c for the period. Diluted adjusted headline earnings, excluding the effect of the R161m, were at 420.6c per share from 398.3 previously.
Group MD André Hanekom, who retires next March, said the year under review continued to be challenged by muted consumer spend on bread, maize, wheaten products and fruit juices in particular, as price adjustments affected affordability.
Pioneer grew revenue by 10% to R18.6bn, with volumes falling 5% and selling prices increasing 15% on average over the comparative period.
Daniel Isaacs, an equity analyst at 36One Asset Management, said that, as expected, the group’s overall results were "strained".
"The 420.6c, which is a bottom-line earnings, was quite heavily assisted by the tax charge and lower finance charge, but if you look at the actual operating income line, if you strip out all the BEE (black economic empowerment) effects and the share incentive scheme payments both on the previous and current year, the purely operational operating line decreased 6%, which is a bit disappointing.
"What the company was facing was a massive increase in input costs and the inability to pass these costs on to the consumer efficiently," he said.
The group’s agribusiness underperformed — revenue increased 12% to R3bn, while a net operating loss of R49m was recorded. Sasko’s performance fell short of financial targets, the company said. Revenue gained 10% to R10bn.
"Their divisions have not performed fantastically, except for Bokomo, which performed very well," Mr Isaacs said.
Bokomo Foods advanced revenue by 11% to R3bn.
Meanwhile, Ceres Beverages disappointed with a 35% decline in operating profit to R88m.
Mr Isaacs said the "big thing" was whether the company’s input costs would moderate into the next year.
"A mass effect of that being the next crop in the US. The American crop needs a really good year to alleviate the global price pressure of maize. Any sort of risk to that will keep the maize price elevated," he said.