MASSIVE hikes in world grain prices caused by an increased demand worldwide and extreme weather conditions have severely affected local prices, with a direct impact on Pioneer Foods’ earnings.
A drive to raise R1 billion to fund a capital expansion programme has prompted Pioneer Foods to consider a possible listing on the Johannesburg Stock Exchange during the first half of 2008.
Announcing the company’s results for the year to September, MD André Hanekom said that the international scarcity of grain had caused local import parity prices to soar by an average of 48% for wheat, 42% for white maize, and 60% for yellow maize.
”This has put a tight squeeze on the Group’s operating profit margins, resulting in a drop from 7,7% to 7,1%,” he said.
”The drought in South Africa at the beginning of the year negatively affected the local supply of wheat and maize, resulting in one of the highest levels of imports ever. This, together with declining world grain stocks, could further fuel the already high rate of food inflation,” says Hanekom.
For the year under review, revenue increased by 21% to R11,7 billion, while operating profit grew by 11% to R832 million. Headline earnings rose marginally by 2% to R503 million.
”Headline earnings were further eroded by net finance charges of R116 million and increased taxes. The investment in working capital rose by R351 million, while R714 million was spent on fixed assets and new acquisitions as a first phase in repositioning the Group’s infrastructure and production capacity,” says Hanekom.
Net interest bearing debt increased to R1,2 billion at year end, resulting in a debt to equity ratio of 33%.
A final dividend of 66 cents per ordinary share has been declared, bringing the total dividend for the year to 93 cents.
A dividend of 19,8 cents per class A ordinary share has been declared - being 30% of the dividend payable to ordinary shareholders in terms of the broad based employee share scheme.
”Over the past few years, Pioneer Foods has grown exponentially - with revenue trebling from R4,6 billion in 2000 to R11,7 billion this year. At the same time, sustained growth in sales volumes has placed pressure on the production capacity.”
