JSE-listed Pioneer Foods on Monday posted a 56% decrease in headline earnings, to R454-million for the six months ended March 31, owing to a “confluence of various inhibitors”, which contributed to a material decline in its profitability.
The company noted that maize had been the most significant detractor during the interim period, as a result of an unfavourable procurement position taken in 2016 "to protect supply for South Africa's leading maize brand".
Further, Pioneer’s international division was severely impacted on by a raisin crop shortfall, African exports and a stronger rand.
However, cash generated by its operations increased 27% to R875-million, while group turnover was up 2% to R10.18-billion.
The cost of goods sold increased by 10% owing to a significant raw material cost push, resulting in gross profit decreasing by 16% to R2.6-billion and the gross profit margin being compressed from from 31% to 26%.
Operating profit, before items of a capital nature, adjusted for the 2017 IFRS 2 share-based payment (SBP) charge and the related hedge gain on the Phase I broad-based black economic empowerment (BBBEE) transaction, the 2016 SBP BEE transaction gain and one-off merger and acquisition (M&A) costs, decreased by 43% to R700-million and the adjusted operating profit margin declined from 12% to 7%. This, notwithstanding a sustained focus on cost management and the extraction of efficiencies.
The BEE SBP charge and the marked-to-market on the hedge relating to the BEE transaction amounted to a net charge of R3.1-million, compared with a gain of R142.7-million in the prior period. The M&A costs amounted to R9.3-million.