Pioneer Food Group boosted headline earnings by 193% to R422-million for the six months ended March 31 2011.
This translated into diluted headline earnings per share of 231.4 cents versus 80.3 cents for the previous comparable half-year.
However, if a penalty provision for R350-million is excluded in the comparative period, earnings reflect a 15% decline.
The group declared an interim dividend of 40 cents, compared to no dividend last year.
Andre Hanekom, group managing director, commented: “We are satisfied with this set of results having achieved volume growth in a number of key categories in a volatile pricing environment. Inflation accelerated in our product basket to around 4% from October last year. Operating profit margins remained relatively stable. Continuing upward pressure on costs has necessitated price increases in most categories since March. However, we believe there is room for further growth in our range of essential foods. We are investing in additional capacity in all business units to meet anticipated improving demand.”
Group revenue increased by 4% to R8.3-billion with volumes improving by about 6% and prices decreasing by about 2% over the comparative period. Measured against the six-month period from April to September 2010, group revenue increased by 7%. Volumes increased by about 3% and prices at around 4%.
Revenue from specified bread and wheaten flour products were impacted negatively by delayed price increases to implement the gross profit reductions as agreed with the Competition Commission as part of the settlement reached in November 2010.
Operating profit before items of a capital nature increased by 54% to R658-million. However, if the provision for the Competition Commission penalties of R350-million raised in the comparative period is reversed, operating profit decreased by 15%.
Net cash profit from operating activities declined by 8% to R875-million. The investment in working capital increased substantially by R878-million, largely due to higher raw material prices, as well as timing differences in settlement of accounts receivable and payable. In addition to the increased working capital investment, the first penalty payment of R67-million in terms of the Competition Commission settlement was made.
The net effect of the above resulted in net cash of R69-million being utilised from operations in the reporting period.
Net cash invested in the business, after accounting for the acquisition of a broiler business acquired in Gauteng, amounted to R492-million in line with an approved capital expansion programme, contributing to net interest-bearing debt increasing to R1.174-billion from R406-million a year ago, or 23% of equity at the reporting date.
Looking ahead, Pioneer Food said: “The financial performance of the group for the full year will be influenced by the group’s ability to manage margins in a challenging operating environment with volatile input costs trending upwards and uncertain consumer spending patterns.” — I-Net Bridge