| Fri 16 Mar 2012, 7:05 | | PFG - Pioneer Food Group Limited - Further trading update and earnings guidance |
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PFG
PFG
PFG - Pioneer Food Group Limited - Further trading update and earnings guidance,
inclusive of the impact of the BEE transaction
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 Group" or "the Company")
Further trading update and earnings guidance, inclusive of the impact of the BEE
transaction
Pioneer Foods provides this trading update and earnings guidance based on the
results for the five months to 29 February 2012, ahead of the Group`s closed
period from 16 March 2012 to the publication of the interim results for the six
months to 31 March 2012 on or about the 21st of May 2012.
Trading update
Revenue for the five months increased by 13% to R7.5 billion with volumes
contracting by between 4% and 6% on average in the Group`s product basket as
consumer spend remains constrained. Price inflation on the Group`s basket of
products is estimated at about 18% for the period under review.
Substantial increases in operating costs continued, most notably in electricity,
payroll and transport costs. Although maize prices retreated from historical
highs in the short term, overall grain raw material prices are still
significantly higher than in the comparative period. Margin maintenance is
driven by actively managing selling prices and diligent cost control measures.
Sasko`s sales volume performance for wheaten flour and bread is impacted by the
increased volume base in the comparative period resulting from the gross profit
reduction in that period. As a result wheaten flour and bread sales volumes were
down and some market share was shed in the standard bread market. The share of
the expanding premium bread market has grown, though off a low base.
National maize meal consumption in general has been weaker, though it is still
at a relatively high base. The Group continued to price its maize meal products
as required with market leadership maintained within a stable market share
environment.
Rice and pasta volumes increased despite the increased presence of cheaper
imported products in both categories. Rice prices increased whereas pasta prices
remained constant.
The Agri business remained under pressure in the broiler and egg markets. The
industry is grappling with cheaper imports, systemic oversupply and historically
high maize prices. Selling prices remained under pressure.
In Bokomo Foods, breakfast cereals performed well with an expanded range of
value-added products in Weet-Bix, Nature`s Source and Otees.
The launch of Moir`s biscuits has been well received and the production roll-out
is progressing to expectation. The outlook for raisins is improving and volumes
should be better in the current financial year.
At The Ceres Beverage Company, ready-to-drink beverage volumes came under
increasing pressure towards the end of the period under review. A significant
cost increase in fruit concentrates in particular as well as higher fuel costs
impacted margins.
Pepsi is continuing to grow volumes close to double-digits.
Volumes in the fruit concentrate mixtures category continued to grow by double
digits as consumers supported these products as more affordable alternatives to
ready-to- drink products. Fruit concentrate mixtures remains a very competitive
category.
The Wadeville fruit juice factory is being commissioned and is expected to be
fully operational by the end of the financial year. Service levels are
anticipated to improve and distribution cost savings will be realised by
producing closer to the market.
Completion of BEE transaction
The final outstanding conditions precedent for implementing the 13,5% BEE
transaction are close to fulfilment and Pioneer Foods anticipates that the 28,7
million additional ordinary shares resulting from the transaction will be issued
and listed on the JSE soon.
Pioneer Foods will receive net cash of R546 million after the initial
contribution for the subscription price from the BEE shareholders and the
financiers of the transaction. For the first seven years these newly listed
shares will be treated as treasury shares in terms of IFRS accounting principles
with a minimal impact on earnings or earnings per share. The exception is the
recognition of the once off non cash flow share-based payment charge in terms of
IFRS ("IFRS charge"). The impact on earnings in the reporting period is
estimated at R154 million.
Shareholders are referred to the circular (dated 19 January 2012) for the detail
of the transaction.
Impact on earnings
Consequently earnings and headline earnings per share, including the IFRS charge
of R154 million, is expected to decrease by between 45% and 55% compared to the
corresponding period of the previous year.
Adjusted earnings and headline earnings per share, excluding the IFRS charge is
expected to decline by between 9% and 19% compared to the corresponding period
of the previous year.
The information provided has not been reviewed or reported on by the Group`s
independent external auditors.
Paarl
16 March 2012
Sponsor
PSG Capital
Date: 16/03/2012 07:05:01 Produced by the JSE SENS Department.
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