Pioneer Foods said on Monday it expected lower earnings and revenue for the year to September, following weaker trade volumes, price increases and more intense competition.
The group owns brands such as Sasko, Bokomo, Marmite, Redro, Liquifruit, Moir’s, Ceres and White Star maize meal.
Pioneer said it expected its headline earnings per share to drop 48%-56% year on year to between R3.98 and R4.70.
Revenue fell 4%-6% from the previous year’s R20.6bn.
SA’s third-largest food producer and processor suffered losses in its fruit export, beverage and maize divisions due to factors including deflation, volume declines and resistance to price increases.
"The unfavourable maize procurement position entered into in 2016 muted the performance of the maize category until June. Maize has since been milled at market-related cost," the company said.
The group’s unfavourable maize hedge position in Botswana also played a role.
Pioneer cited its inability to adjust its cost base to the reality of lagging volumes as the main reason for its poor profit performance for the year.
Decreased demand in the beverage division was brought on by the weak economic climate in African markets and increased competition.
In addition to the factors affecting other divisions, the performance of the fruit export operations was worsened by lower dollar prices and a stronger rand.
However, the bakeries, snacks and treats divisions sustained positive performance. Pioneer successfully commissioned the Aeroton bakery upgrade in the second half of its 2017 financial year.
Like other listed food processors, Pioneer has underperformed the JSE’s all share and industrial indices so far in 2017, driven — according to a note by Morgan Stanley — by earnings downgrades.
The stock now trades at its five-year average historical price:earnings ratio. The share price has dropped 25% since the start of 2017. On Monday, the share price declined a further 2.92% to close at R114.55.
Pioneer is headed by Tertius Carstens, who took over as CEO at the beginning of October with the retirement of Phil Roux after four years at the helm of the food group.
Carstens has been with the group since 1994.
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