The market is unfazed by Pioneer Foods’s R1-billion fine, with Pioneer’s share price hitting a 52-week high of R50 on the day the settlement was announced and since climbing to a price of R53, 20.
The Pioneer share price has risen 42% in the past year, while over the same period the JSE all share index has gained 16%.
Egg and poultry cartels in the wings
The share price of Pioneer’s major listed competitor, Tiger Brands, has risen only 19%.
So, is the market telling us that investors on the JSE don’t care what dirty tricks are used to make money, as long as money is being made?
One analyst said he could not see why Pioneer’s share price was valued so high, especially considering that the R1-billion in fines equated to 10% of the company’s R10-billion market capitalisation.
Pioneer’s fine
It was only in September that Pioneer announced that the R350-million it had made provision for to settle the cases would probably be insufficient. It has also announced that the fine would have the effect of reducing the company’s profit by 95% in the current financial year.
The analyst said that the shareholders of Pioneer Foods should be calling for the executive management’s heads because they misrepresented Pioneer’s involvement in the bread and milling cartels to the market by claiming that they were innocent.
The company also misrepresented the facts to its shareholders. “They [Pioneer shareholders] should be demanding their resignations,” said the analyst.
However, KK Combi, Pioneer’s chairperson, does not see things that way, arguing that he still has faith in Pioneer’s executive management.
Combi said that managing director André Hanekom, financial director Leon Cronje and executive director of Sasko Tertius Carstens had been stripped of all bonuses and share options for the Âcurrent financial year.
The board took full responsibility for the anti-competitive practices, he said.