JSE-listed Pioneer Foods posted solid results for the 2016 financial year, despite the impact of the drought on maize and other crops, a higher wheat import duty and rand volatility.

It posted a net profit of R1.69-billion for the year ended September 20, compared with a profit of R1.13-billion the year before.

Earnings a share rose 49% year-on-year to 912c, while headline earnings a share were up 36% to 904c.

Adjusted headline earnings a share from continuing operations, excluding the Phase I broad-based black economic empowerment (BBBEE) share-based payment charge and hedge, increased by 6% to 883c.

Earnings a share from continuing operations, on an adjusted basis, increased by 9% to 904c.

During the reporting period, the share price decreased from R195.76 to R173.87 resulting in the recognition of a gain of R23-million.

Further, the group entered into forward purchase contracts using its own equity to hedge itself against the upside risk of the group's share price in terms of the Phase I BBBEE scheme.

A net gain of R16-million was recognised on the hedge for the year.

Export revenue into the rest of Africa came under pressure amidst severe currency devaluation to the rand and the deterioration of in-country consumer spending power as a consequence.

Pioneer’s gross profit margin for the period decreased from 31.9% to 29.5%, while revenue increased by 12%.

The operating profit margin contracted from 11.5% to 11% owing to significant raw material inflation and portfolio mix effect.

ESSENTIAL FOODS
Of Pioneer’s various divisions, the Essential Foods division was impacted on the most, given the significant raw material inflation on maize, wheat duty structure, drought and rand/dollar exchange rate volatility.

Profitability contracted by 2% and the operating margin by 160 basis points.

The maize category showed demand resilience owing to White Star regaining volume in the second half, ending the year down 5% relative to the 14% contraction in the interim period.

GROCERIES
The Groceries division increased volumes by 2% and operating profit by 25%, while expanding margins by 250 basis points.

The division had to contend with significant raw material inflation in the second half of the financial year, owing to currency movements and crop shortages in certain instances.

Competition within the long life juice category remained intense and the impact of the proposed sugar tax on long life juice remains uncertain.

Exciting innovation in the form of Liqui-Fruit Sparkling was launched to further bolster the product portfolio.

“Breakfast Cereals delivered a stellar performance. A particular focus on brand architecture, pack designs and brand communication will further enhance Bokomo as the category leader,” the group said.

It added that Weet-Bix continues to maintain increased brand stature and leadership, while Futurelife has successfully introduced new product innovations.