Pioneer Foods interim financial results for the six months ended 31 March 2018.

Salient Features

Revenue R9 899 million -3%
Adj op profit (before items of a capital nature)* R949 million +36%
Earnings R620 million +35%
Earnings per share 332 cents +34%
Diluted earnings per share 315 cents +37%
Headline earnings R592 million +30%
Headline earnings per share 317 cents +30%
Diluted headline earnings per share 301 cents +32%
Adjusted headline earnings* R597 million +27%
Adjusted headline earnings per share* 320 cents +26%
Net cash profit from operating activities 1 195 million +34%
Net asset value per share 4 340 cents +2%
Interim gross dividend per listed ord share (2017: 105 cents) 105 cents

* HE and operating profit (before items of a capital nature) are adjusted for the impact of the share-based payment charge of the B-BBEEE Phase I equity transaction and related hedge and (in 2017 only) for once-off merger and acquisition costs.



Pioneer Foods delivered a credible performance for the six months ended 31 March 2018, with both volume and margin growth over the comparative period.

Total sales volumes are 4% higher following the judicious management of relative price points that also supported market share growth. Group turnover, however, marginally decreased by 3% from R10.2 billion in the comparative period to R9.9 billion, largely due to price deflation in soft commodities that weakened price realisations, principally in maize and to a lesser extent, wheat and rice.


Gross profit increased by 12% to R2.9 billion, mainly as a result of volume growth and the normalisation of the maize procurement position. The gross profit margin increased from 25.7% to 29.6%.

Operating profit, before items of a capital nature, adjusted for the Phase I B-BBEE ("BEE") transaction share-based payment income/charge and related hedge ("SBP") and for once-off merger and acquisition ("M&A") costs in 2017, increased by 36% to R949 million. In turn, the adjusted operating profit margin increased from 6.9% to 9.6%.

Profit before income tax, after finance costs of R88.9 million (2017: R88.0 million), increased by 38% to R896.5 million. The share of profit of joint ventures and associates amounted to a loss of R21.6 million (2017: R30.0 million profit) as explained below.

Earnings per share ("EPS") increased by 34% to 332.5 cents and headline earnings per share ("HEPS") increased by 30% to 317.1 cents per share. HEPS, adjusted for the
BEE SBP net charge/gain and for once-off M&A costs in 2017, increased by 26% to 319.9 cents per share.

Segmental review
Six months ended 31 March 2018

Segmental revenue Segmental operating profit*
2018 % 2018 %
R'm change R'm change
Essential Foods 5 826 (10%) 561 70%
Groceries 2 647 9% 292 (3%)
International 1 426 10% 121 75%
Corporate^ - (25)
Total 9 899 (3%) 949 36%

Essential Foods

The business achieved 70% operating profit growth through a strong maize performance as well as pasta and rice profit expansion. Improved sales volumes and the normalisation of the raw material procurement position supported the sound recovery in maize profitability. White Star benefited from general category growth and has retained its market leading position.

The improvement in maize was, however, partially offset by a regression in the wheaten value chain performance. Flour and bread experienced margin compression in the face of weaker demand and a more competitive environment. Additional KZN baking capacity was successfully commissioned in December 2017 and fully available from April 2018, following the refurbishment of existing installations at Shakaskraal bakery. The Durban wheat mill upgrade is also progressing to plan and will enhance value chain competitiveness from 2019. The baking capacity-renewal investment in Gauteng, that came online in 2017, is making a positive contribution.


Good top-line growth during the period, driven by volume growth, restored market share in key categories, in some instances at lower price points to maintain competitiveness that compressed profit and margins for the period.

Cereals, long-life fruit juice, baking aids and desserts performed well from a volume and operating profit point of view. The snacking category recorded negative volume growth and consequently a decline in profitability. Both the dilutables and ice tea categories continued to shrink in value while Wild Island delivered pleasing volume growth.

Operating costs overall were tightly managed. Liqui-Fruit recovered volume and gained market share, while Weet-Bix maintained share in an expanding category.
Safari also maintained market share.


Long-life fruit juice and dried fruit export volumes and margins recovered in line with expectations and posted a significant improvement on 2017 profitability.
Margin recovery is, however, as previously indicated, not comparable to that achieved during 2016. The lower margin relative to 2016 is mainly due to the stronger rand and the continuous constrained trading environment in southern African markets, in particular Zimbabwe, as well as the strengthening of the exchange rate from fruit procurement to time of export.

The Lizi's acquisition has been successfully integrated into Pioneer Foods UK and is already making a positive profit contribution. The UK's Peterborough business has delivered solid volume growth and consequent margin improvement. The Nigerian business performed to expectation, delivering strong profit and volume growth. A solid operating platform has been established and the business is now ready for capacity investment.

Joint ventures

The financial performance of joint ventures as a whole was materially impacted by once-off adjustments of certain items on the Heinz Foods SA balance sheet. Regulatory approval of the Heinz Foods SA acquisition was granted on 9 May 2018, with certain contractual conditions still outstanding. It is anticipated that this will be finalised before the end of May with an effective date of 1 June 2018. Management is confident that this business's performance should improve materially when integrated into Pioneer Foods.

The contribution from joint ventures, excluding Heinz Foods SA, showed good earnings growth mainly because of good performances from Weetabix East Africa and Bowman Ingredients SA.


Net cash profit from operating activities increased by 34% to R1 195.0 million (2017: R891.8 million). Investment in working capital increased by R1 151.6 million.
The Group normally invests more in working capital for the interim period ending March. The increased investment in working capital is largely due to local procurement in respect of wheat and maize compared to a larger import component in the prior year, resulting in a material decrease in trade payables.

Capital expenditure amounted to R222.3 million (2017: R369.1 million).

The Group acquired Lizi's in the UK, effective 11 December 2017, for a total consideration of R283.3 million.

The Group's net interesting-bearing debt, excluding the R449.2 million third-party debt relating to the Phase II B-BBEE transaction partners, amounted to R1 788.1 million at 31 March 2018, with a debt to equity ratio of 22% (31 March 2017: 18%), compared to net debt of R612.3 million at 30 September 2017.


The Group is well positioned to deliver sustained volume and improved value growth while maintaining a firm handle on costs and efficiencies. The Group anticipates further improvement in performance in the second half of the financial year.


A gross interim dividend for the six months ended 31 March 2018 of 105 cents (2017: 105 cents) per share has been approved and declared by the Board from income reserves. The applicable dates are as follows:

Last date of trading cum dividend Tuesday, 26 June 2018
Trading ex-dividend commences Wednesday, 27 June 2018
Record date Friday, 29 June 2018
Dividend payable Monday, 2 July 2018

Share certificates may not be dematerialised or materialised between Wednesday, 27 June 2018 and Friday, 29 June 2018, both days inclusive.

A gross interim dividend of 31.5 cents (2016: 31.5 cents) per class A ordinary share, being 30% of the gross interim dividend payable to ordinary shareholders in terms of the rules of the relevant employee scheme, will be paid during July 2018.

The above statements have not been reviewed or reported on by the auditors of Pioneer Foods.

By order of the Board

ZL Combi TA Carstens
Chairman Chief Executive Officer

Tyger Valley
17 May 2018


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