| Mon 25 May 2009, 7:05 | | PFG - Pioneer Food - Condensed interim financial results for the six months |
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PFG
PFG
PFG - Pioneer Food - Condensed interim financial results for the six months
ended 31 March 2009
Pioneer Food Group Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1996/017676/06)
(Share code: PFG)
(ISIN code: ZAE000118279)
("Pioneer Foods" or "the Company" or "the Group")
Condensed interim financial results for the six months ended 31 March 2009
Revenue R8.4 Billion up 20%
Operating profit (before items of a capital nature) R549 million up 39%
Headline earnings per ordinary share 170 cents up 18%
Interim dividend per ordinary share 36 cents up 20%
Andre Hanekom MD commented:
"We are pleased with our results overall, though we recognise our growth is off
a relatively low base.
We had satisfactory revenue growth, largely from price increases up to October
last year, when the prices of grain based products peaked. Sales volumes were
largely sustained, with maize meal growing particularly strongly.
There has been selling price decreases towards the end of the reporting period
in wheaten flour, maize meal, pasta and wheat based cereals, which should
support consumer demand.
We expect to maintain our margin as food inflation moderates and the food price
environment stabilises."
Enquiries
Andre Hanekom, MD 021 807 5106 / 082 808 3549
Leon Cronje, FD 021 807 5105 / 082 801 7772
Johannes van Niekerk (College Hill) 011 447 3030 / 082 921 9110
Commentary
Results
Revenue increased by 20% to R8.4 billion for the six months to 31 March 2009
largely from increased sales prices compared to last year.
The Group`s operating profit margin improved from 5.7% to 6.6% with operating
profit improving by 39% to R549 million for the six months under review.
Cash profit from operating activities improved by 32% to R711 million and
headline earnings by 34% to R297 million. Headline earnings per share increased
by 18% to 170 cents per share with the weighted average number of shares in
issue increasing by 20.3 million, mainly from the issue of 20 million shares in
June 2008 following the rights offer.
Decreasing inflation since September 2008 limited the investment in working
capital to R154 million compared to R604 million in the comparative period.
Fixed capital expenditure amounted to R198 million and was curtailed to
essential additions and replacements given the uncertain economic outlook.
Group debt decreased by R41 million since September 2008 to R1,414 million which
equates to 32% of equity.
Operational review
The Sasko segment achieved pleasing results. White Star super maize meal
products achieved excellent sales volume growth at firm prices. Bread sales
volumes were largely maintained and sales volumes of wheaten products, pasta and
rice were lower.
Revenue increased by 23% to R4,469 million mainly as a result of increased sales
prices to recover the substantially increased cost base of 2008. The operating
profit margin improved to 8.2% as a result and can be sustained if current
circumstances prevail.
Operating profit improved to R365 million from a low base last year impacted by
delayed price increases and once off commissioning costs at the Bloemfontein and
Port Elizabeth bakeries.
The Krugersdorp wheat mill capacity increase and efficiency upgrade was
successfully completed at a cost of R85 million during the period under review.
The Agri Business segment increased revenue by 10% to R1,342 million and
operating profit by 8% to R41 million. The egg business delivered a significant
turnaround weighed down by a disappointing performance from the broiler
business.
Tough trading conditions in the broiler business prevented a proper recovery of
increased costs. Certain on-farm performances were disappointing and are being
addressed. The animal feed business performed satisfactorily.
Revenue from the Bokomo Foods segment increased by 9% to R1,334 million.
Operating profit increased by 7% to R126 million with the operating profit
margin slightly down to 9.5% from 9.7%, confirming a remaining lag in cost
recovery.
Sales volumes of breakfast cereal products were maintained at acceptable levels
in the difficult economic climate. The new Weet-Bix facility is expected to be
commissioned by September 2009 at a cost of R130 million.
The Heinz Foods (SA) joint venture performed satisfactorily. It acquired a
frozen food facility in Gauteng in February 2009. This acquisition will address
the capacity constraints of the current Western Cape based facility and should
enable cost savings in distribution.
The Ceres Beverage segment performed well, specifically in the export business
that benefited from good volume growth and the weaker rand in the period under
review.
Double-digit growth in sales volumes from the Pepsi venture further contributed
to a 23% growth in revenue from this business segment to R1,357 million for the
reporting period. The operating profit margin improved slightly from 5.9% to
6.0% and operating profit increased by 24% to R81 million.
The business of Ceres Spring Water was acquired in November 2008 to enter the
fast growing water category.
Prospects
A more stable food price environment is expected to contribute to an improved
operational performance for the full year, though upward cost pressures persist.
The growth momentum for the full year is expected to be in line with that
achieved in the first half, whilst dependent on the following assumptions:
- Sales volumes from maize meal products to remain at full production
capacity
- Sales volumes from bread to be sustained
- Sales volumes from wheaten products to improve
- A much improved performance from the egg business over the corresponding
second half of the previous year
- No profit contribution from the broiler business in the current financial
year
- Lower raisin export volumes due to a substantially smaller crop
- Improvement in contribution from the fruit concentrate mixtures category
Dividend
The board approved an interim dividend of 36.0 cents (2008: 30.0 cents) per
ordinary share, an increase of 20% to the declaration for the comparative
period. The applicable dates are as follows:
Last date of trading cum dividend: Friday, 26 June 2009
Trading ex dividend commences: Monday, 29 June 2009
Record date: Friday, 3 July 2009
Dividend payable: Monday, 6 July 2009
An interim dividend of 10.8 cents (2008: 9.0 cents) per class A ordinary share,
being 30% of the interim dividend payable to ordinary shareholders in terms of
the rules of the relevant employee scheme, will be paid during July 2009.
Share certificates may not be dematerialised or rematerialised between Monday,
29 June 2009, and Friday, 3 July 2009, both days inclusive.
By order of the board.
HE Blanckenberg WA Hanekom
Chairman Managing Director
Paarl, 20 May 2009
Group Income Statement
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 30 September
31 March 31 March 2008
2009 2008 R`m
R`m R`m
Revenue 8,374.2 6,978.9 14,884.4
Cost of goods sold (6,188.4) (5,116.2) (11,003.4)
Gross profit 2,185.8 1,862.7 3,881.0
Other expenses (1,637.0) (1,468.2) (3,015.9)
Items of a capital nature (0.3) 1.3 (19.4)
Operating profit 548.5 395.8 845.7
Investment income 14.3 15.9 31.5
Finance costs (124.7) (98.2) (250.8)
(Loss)/profit from associated 0.6 0.7
companies (0.3)
Profit before income tax 437.8 314.1 627.1
Income tax expense (140.4) (90.0) (174.4)
Profit for the period 297.4 224.1 452.7
Attributable to:
Equity holders of the Group 296.8 223.6 452.2
Minority interest 0.6 0.5 0.5
297.4 224.1 452.7
Headline Earnings Reconciliation
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 30 September
31 March 31 March 2008
2009 2008 R`m
R`m R`m
Reconciliation between profit
attributable to equity
holders and headline earnings
Profit attributable to equity 223.6 452.2
holders of the Group 296.8
Items of a capital nature 0.3 (1.3) 19.4
Net loss/(profit) on disposal (1.7)
of property, plant and 0.7 (0.4)
equipment
Net profit on disposal of (0.9) (1.2)
investments (0.4)
Impairment of property, - 22.3
plant, equipment and -
intangible assets
Tax effect on items of a (0.1) (3.3)
capital nature (0.3)
Headline earnings 296.8 222.2 468.3
Number of issued ordinary 181.2 201.2
shares (million) 201.2
Number of issued treasury
shares:
- held by subsidiary 18.0 18.0 18.0
(million)
- held by share incentive 8.4 8.6
trusts (million) 8.4
Number of issued class A 13.3 12.6
ordinary shares (million) 12.0
Weighted average number of 154.3 160.2
ordinary shares (million) 174.6
Earnings per ordinary share
(cents):
- basic 169.9 144.9 282.3
- diluted 166.4 140.8 275.5
- headline 169.9 144.0 292.4
- diluted headline 166.4 140.0 285.3
Dividend per ordinary share
(cents) 36.0 30.0 96.0
Dividend per class A ordinary 9.0 28.8
share (cents) 10.8
Net asset value per ordinary 2,529.8 2,417.8 2,437.6
share (cents)
Debt to equity ratio (%) 32.0 53.0 34.2
Group Balance Sheet
Unaudited Unaudited Audited
31 March 31 March 30 September
2009 2008 2008
R`m R`m R`m
Assets
Property, plant and equipment 3,023.2 2,787.5 2,942.7
Goodwill 273.9 283.7 269.6
Other intangible assets 406.3 414.8 409.9
Biological assets 13.7 9.8 11.9
Investments in and loans to
joint ventures and associates 44.3 30.0 32.4
Available-for-sale financial
assets 25.0 32.9 29.2
Trade and other receivables 15.8 8.4 12.3
Deferred income tax assets 35.9 27.4 36.2
Non-current assets 3,838.1 3,594.5 3,744.2
Current assets 4,604.6 4,270.5 4,297.0
Inventories 2,263.9 2,121.7 2,184.1
Biological assets 148.8 132.4 143.5
Derivative financial 12.0 9.3 13.7
instruments
Trade and other receivables 1,832.3 1,786.6 1,690.8
Current income tax assets 3.8 31.3 39.2
Cash and cash equivalents 343.8 189.2 225.7
Total assets 8,442.7 7,865.0 8,041.2
Equity and liabilities
Capital and reserves 3,741.7 4,256.8
attributable to equity 4,421.6
holders of the Group
Share capital 20.1 18.1 20.1
Share premium 1,216.5 733.1 1,216.5
Treasury shares (259.5) (250.3) (260.0)
Other reserves (1.0) 161.3 16.6
Retained earnings 3,445.5 3,079.5 3,263.6
Minority interest 6.6 6.0 6.0
Total equity 4,428.2 3,747.7 4,262.8
Non-current liabilities 1,783.4 663.7 1,758.8
Borrowings 1,168.0 156.2 1,181.3
Provisions for other 77.4 78.3
liabilities and charges 84.3
Share-based payment liability 19.9 - 19.4
Derivative financial 58.3 - 37.4
instruments
Deferred income tax 452.9 430.1 442.4
liabilities
Current liabilities 2,231.1 3,453.6 2,019.6
Trade and other payables 1,577.6 1,402.3 1,485.4
Current income tax 22.2 21.4 18.4
liabilities
Derivative financial 40.9 8.6 16.3
instruments
Borrowings 590.2 2,021.1 499.3
Dividends payable 0.2 0.2 0.2
Total equity and liabilities 8,442.7 7,865.0 8,041.2
Group Cash Flow Statement
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 30 September
31 March 31 March 2008
2009 2008 R`m
R`m R`m
Net cash profit from 540.4 1,141.7
operating activities 711.3
Cash effect from hedging (34.8) (140.5)
activities 38.5
38.5
Working capital changes (154.4) (604.4) (511.2)
Net cash generated/(utilised) (98.8) 490.0
by operations 595.4
Income tax paid (86.5) (127.6) (178.3)
Net cash flow from operating (226.4) 311.7
activities 508.9
Net cash flow from investment (363.7) (648.9)
activities (227.1)
Property, plant, equipment
and intangible assets
- additions and replacements (198.0) (369.8) (647.8)
- proceeds on disposal 6.7 6.2 25.1
Business combinations (33.8) - (35.2)
Proceeds on disposal of and (16.0) (22.5)
changes in investments and (16.3)
loans
Interest received 13.5 15.5 30.5
Dividends received 0.8 0.4 1.0
Net cash flow from financing (55.2) 1,140.9
activities (296.1)
(Repayments of)/proceeds from 148.2 1,066.6
borrowings (54.8)
Ordinary shares issued - - 485.7
Treasury shares - share (0.7) (10.4)
incentive trusts 0.5
Employee share schemes (2.3) (1.5)
transactions (1.7)
Interest paid (124.7) (98.2) (250.8)
Dividends paid (115.4) (102.2) (148.7)
Net cash and short-term - 2.8
borrowings from business -
combinations
Net (decrease)/increase in (645.3) 806.5
cash, cash equivalents and
bank overdrafts (14.3)
Net cash, cash equivalents (885.5) (885.5)
and bank overdrafts at
beginning of year (79.0)
Net cash, cash equivalents (1.530.8) (79.0)
and bank overdrafts at end of (93.3)
year
Group Statement of Changes in Equity
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 30 September
31 March 31 March 2008
2009 2008 R`m
R`m R`m
Share capital, share premium 500.9 976.6
and treasury shares 977.1
Opening balance 976.6 503.1 503.1
Movement in treasury shares 0.5 (0.7) (10.4)
Ordinary shares issued - - 485.7
Employee share scheme - (1.5) (1.8)
repurchase of shares -
Other reserves (1.0) 161.3 16.6
Opening balance 16.6 149.4 149.4
Transfers from retained 0.3 0.7 0.9
earnings
Equity compensation reserve 7.6 7.2
transactions 5.7
Conversion of foreign (12.7) 18.2 9.8
currency
Fair value adjustments to (2.6) (6.5)
available-for-sale financial
assets (4.0)
Transfer to cash-settled - - (28.2)
liability
Hedging reserve (6.9) (12.0) (116.0)
Retained earnings 3,445.5 3,079.5 3,263.6
Opening balance 3,263.6 2,956.7 2,956.7
Profit for the period 296.8 223.6 452.2
Dividends paid (115.4) (102.1) (148.6)
Transfers to other reserves (0.3) (0.7) (0.9)
Management share incentive 2.1 4.3
scheme - disposal of shares 0.8
Employee share scheme - stamp (0.1) (0.1)
duty on share transactions -
Minority interest 6.6 6.0 6.0
Opening balance 6.0 5.8 5.8
Dividend paid - (0.3) (0.3)
Profit for the period 0.6 0.5 0.5
Total equity 4,428.2 3,747.7 4,262.8
Group Segment Report
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 30 September
31 March 31 March 2008
2009 2008 R`m
R`m R`m
Segment revenue
Sasko 4,468.6 3,630.6 8,143.0
Agri Business 1,341.7 1,217.0 2,493.4
Bokomo Foods 1,333.5 1,221.6 2,539.4
Ceres Beverages 1,356.5 1,099.0 2,082.9
8,500.3 7,168.2 15,258.7
Less: Internal revenue (126.1) (189.3) (374.3)
8,374.2 6,978.9 14,884.4
Segment results(Operating
profit before items of a
capital nature)
Sasko 365.1 197.5 622.0
Agri Business 40.8 37.9 3.5
Bokomo Foods 126.4 118.4 239.4
Ceres Beverages 80.9 65.3 77.8
Unallocated (64.4) (24.6) (77.6)
548.8 394.5 865.1
Notes to the condensed interim consolidated financial statements
1. Basis of preparation
The unaudited interim results of the Group for the six months ended
31 March 2009 have been prepared in accordance with the recognition and
measurement principles of International Financial Reporting Standards (IFRS),
the Listing Requirements of the JSE Limited and the requirements of the South
African Companies Act, Act 61 of 1973, as amended. These interim condensed
consolidated financial statements comply with the requirements of IAS 34 -
Interim Financial Reporting.
2. Accounting policies
These interim condensed consolidated financial statements incorporate accounting
policies that are consistent with those applied in the Group`s annual financial
statements for the year ended 30 September 2008, except for the following new or
revised accounting standards and interpretations of those standards that the
Group adopted:
- IFRIC Interpretation 12 - Service Concession Arrangements (effective 1
January 2008)
- IFRIC Interpretation 13 - Customer Loyalty Programmes (effective
1 July 2008)
- IFRIC Interpretation 14 - IAS 19 - The limit of a Defined Benefit Asset,
Minimum Funding Requirements and their Interaction (effective
1 January 2008)
The adoption of these new or revised standards and interpretations did not have
a material impact on the Group results for the six months ended 31 March 2009.
3. Share capital
During the six months ended 31 March 2009 the following share transactions
occurred:
Listed ordinary shares
No listed ordinary shares were issued or bought back.
Treasury shares held by the share incentive trusts
A net number of 151,020 ordinary shares of 10 cents each were sold.
Unlisted class A ordinary shares
During the period under review 637,560 class A ordinary shares of 10 cents each
were bought back from employees that left employment of the Group, for an amount
of R8,744.
4. Borrowings
No new borrowing arrangements were concluded during the period under review.
Changes in borrowings reflect the repayments made in terms of agreements. Short-
term borrowings fluctuate in accordance with changing working capital needs.
5. Post-balance sheet events
There have been no material events requiring disclosure after balance sheet date
and up to the date of approval of these condensed financial statements.
6. Business combinations
No material business combinations occurred during the period under review.
7. Contingent liabilities
7.1 Complaint Referrals by Competition Commission
In May 2008 Pioneer Foods (Pty) Ltd received a complaint referral by the
Competition Commission for alleged restrictive practices in contravention of
section 4(1)(b)(i) and section 4(1)(b)(ii) of the Competition Act of 1998 in the
national bread market. This complaint referral is in addition to the one
received in the previous financial year for alleged restrictive practices by the
Western Cape bakeries. Due to the fact that both complaints relate largely to
the same subject matter, the matters have been consolidated for hearing. It is
expected that the Competition Tribunal`s hearing of the complaints will commence
during the second half of June 2009. Should Pioneer Foods not be successful in
its defence, an administrative penalty may be imposed in terms of section 59 of
the Competition Act. Independent legal advice indicates a reasonable chance of a
successful defence by Pioneer Foods against all or some of the complaints. A
liability for a penalty only arises if contraventions of the Act are ultimately
proven. Accordingly, no provision has been made for the payment of an
administrative penalty. The amount of an administrative penalty will be
determined by taking into account the considerations listed in section 59(3) of
the Competition Act, but may not exceed 10% of the annual turnover of Pioneer
Foods in the financial year preceding the referral. In the meantime, in keeping
with its commitment to good corporate governance, the board established a
committee, consisting of mostly independent non-executive directors, to
investigate all competition compliance related matters. External consultants are
assisting the committee in this assignment. Management instituted a Competition
Compliance Programme, which includes ongoing assessments of business practices
and training of its employees in relation to the Act. A Competition Compliance
Charter for the Group is also in the process of being developed.
7.2 Dispute with egg contract producers
As previously reported, claims were received from some contract producers for
the alleged breach of the terms of specific supply agreements. Based on advice
from the Group`s legal advisors, management is convinced the Group will not
incur any material liability in respect of this matter. Since the previous
report, the claimants withdrew their particulars of claim to review same,
resulting in the cancellation of the agreed date for arbitration. No revised
claims have been received yet.
7.3 Guarantees
The Group issued guarantees of R148.5 million (30 September 2008: R158.4
million) at 31 March 2009, primarily for loans by third parties to contracted
suppliers.
8. Audit
These results have not been audited or reviewed by the auditors.
Directors: HE Blanckenberg (Chairman), JA Louw (Vice-chairman), WA Hanekom
(Managing)*, LR Cronje*, TA Carstens*, MT Swanepoel*, WA Agenbach, GD Eksteen,
AE Jacobs, NS Mjoli-Mncube, AH Sangqu, AC Singleton, Dr FA Sonn, Dr MI Surve,
AW Bester, JH van Niekerk
(* Executive)
Company Secretary: T Naidoo
E-mail: tnaidoo@pioneerfoods.co.za
Registered Address: 32 Market Street, Paarl, 7646, PO Box 20, Huguenot, 7645,
South Africa Tel: 021 807 5100 Fax: 021 807 5280
E-mail: info@pioneerfoods.co.za
Transfer Secretaries: Computershare Investor Services (Pty) Ltd, PO Box 61051,
Marshalltown, 2107, South Africa Tel: 011 370 5000, Fax: 011 688 5219
Sponsor: Barnard Jacobs Mellet Corporate Finance (Pty) Ltd, PO Box 62200,
Marshalltown, 2107, South Africa Tel: 011 750 0207, Fax: 011 750 0607
Date: 25/05/2009 07:05:08 Produced by the JSE SENS Department.
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