Pioneer Foods to list on JSE

Consumer foods maker Pioneer Foods goes public on Tuesday April 22, with 400-million shares as part of its plans to raise capital, it said this week.

Prior to the listing, the company will offer 20-million shares at R25 each in a rights offer intended to raise R500-million.

Pioneer Foods said the capital it plans to raise via the rights offer will not be used to repay debt, but will fund part of its ambitious capital expenditure programme in the next two years.

Specifically, the funds will be used to fund capacity expansions in the milling, baking, cereal and beverage businesses, the owner of Sasko, Bokomo Foods and Ceres Juices brands said.

Pioneer Foods recently approved a R1,2-billion capital expenditure programme, and is grappling with high wheat and maize prices.

The listing has been on the cards for some time, but was delayed partly due to last October’s market volatility and the Competition Commission probe into the bread price-fixing scandal.

Pioneer Foods, along with other three other players, is implicated in the scandal that led to Tiger Brands taking a R99-million fine from the local anti-trust authorities.

The investigation into the allegations continues and if Pioneer Foods is found guilty, it could be fined 10% of the group’s annual turnover of about R11,6-billion.

Pioneer Foods is one of the most significant players in Southern Africa’s food and beverage industry, employing 11 000 permanent workers. The listing would rank it alongside peers Illovo and AVI.

“The group’s performance in the short to medium term will be significantly influenced by the direction of world grain prices,” it said.

For the year to September 2007, the group’s revenue increased by 21% to R11,7-billion, with operating profit before items of a capital nature 11% higher at R832-million. Headline earnings increased marginally by 2% to R503-million, or 328 cents per share.

Pioneer Foods said it expects the effect of increasing interest rates to place further strain on consumer expenditure and the affordability of food.

“While the defensive characteristics of Pioneer Food Group’s food and beverage brands are well known, it seems likely that the rate of growth in sales for the remainder of Pioneer Foods’s 2008 financial year will slow, especially should further price increases become necessary to recover rising input costs and maintain gross margins,” the group said.—I-Net Bridge

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