JOHANNESBURG- Pioneer Foods Group announced that the company’s total volumes have increased to levels of more than 5.2% while Group turnover has decreased by 2.4% largely due to sales price deflation in soft commodities.
Speaking in a cautionary advisory to investors on Friday, the company said its South African business, excluding exports, delivered a solid performance despite the challenging economic backdrop and intensified competition by delivering volume growth of 4.7%.
South African revenue declined by 5.2% largely due to sales price deflation in soft commodities.
In addition, revenue from the Group’s International business, including South African exports, grew by 19.5%.
“The increase in sales volumes resulted in Pioneer Foods gaining market share, confirmed by the growth in our composite corporate market share in top end South African grocers on a three- month basis ending December 2017,” said the company in an announcement.
It added that the improved sales volume performance and normalisation of raw material cost positions should support higher first half margin and profit compared to the corresponding period.
“The improvements will be partially offset by the underperformance in the wheaten value chain as well as price promotional related margin pressure,” company said.
The company also suggested that the maize business delivered a strong performance with White Star regaining market share within a category that has seen high single-digit volume growth for the three-month period under review.
On the other side via its wheaten value chain, including bakeries, the company faced a challenging trading environment which was partly as a result of consumers switching from bread to more affordable maize meal, as well as intensified price promotional activity.
“The additional bread capacity in Kwazulu-Natal which was successfully commissioned in December 2017, will enable more effective participation in the coastal region.”
“The Weet-Bix, Liqui-Fruit and Ceres brands posted excellent performances during the reporting period with double-digit revenue growth. This was mainly as a result of participation in major retailer promotions as well as solid growth in the independent wholesale market,” the company said.
“Beverage exports performed better than expected, but volume growth remains challenging due to currency volatility and the prudent credit management policies in place. Fruit export volumes improved given the higher levels of stock available for sale compared to the prior comparative period.”
The company further explained that the Group’s short-term strategy remains focused on restoring the health of the core portfolio and delivering a substantial recovery on the weak 2017 performance.
“We, however, remain mindful of the major detractors in the wheat and baking value chain, as well as concerns around the performance of the Heinz SA business which is currently being repositioned. The international business will also stand to be impacted by the stronger Rand. It is expected that the overall trading environment will remain competitive.”
“The Group has considerable operations in the Western Cape and in light of the widely-reported water crisis in the region, contingency plans have been developed to ensure sustained supply of products. In addition to a continued containment in overall water consumption, a number of contingencies, have been put in place to limit the impact of the water crisis as far as possible,” explained the company.