Pioneer Foods delivered positive volume and revenue growth at supportive price points whilst maintaining cost discipline and efficiency gains to improve margin and earnings delivery over the weak corresponding period.
Trading conditions reflecting weaker levels of consumer spend, became more challenging in the second semester with rising input costs exacerbated by the weakening ZAR and steady oil price increases together with weak demand. This required corrective price adjustment on a phased basis across categories which is expected to continue in the next reporting period.
Revenue increased by 3% to R20.2 billion and volumes increased by 4%, including acquisitions. Major deflation in maize and constrained price recovery impacted on value growth.
The gross profit margin increased from 26.3% to 28.8% whilst adjusted operating profit (before items of a capital nature) increased by 26% to R1 603 million. The operating profit margin expanded from 6.5% to 8.0% due to good profit growth in cereals, maize and the International businesses.
Profit before income tax increased by 50% to R1 476 million after finance costs of R198 million (2017: R197 million). The share of profit from joint ventures and associates decreased from R60 million to Rnil mainly due to challenges (refer to joint ventures section for further detail) encountered at the Heinz Foods SA business, whilst being equity accounted for a portion of the year.
Earnings were positively impacted by items of a capital nature amounting to a net after income tax profit of R55.2 million (2017: R36.7 million net after income tax loss). Earnings per share increased by 47% to 575 cents per share (2017: 390 cents per share).
Headline earnings per share increased by 33% to 545 cents per share (2017: 410 cents per share). Headline earnings per share was negatively impacted by the net effect of the IFRS 2 share-based payment charge relating to the Phase I (2006) B-BBEE transaction and the effect of the related forward purchase contracts, amounting on a net-basis to a loss of R14.4 million after income tax (2017: loss of R42.2 million after income tax). The hedge is valued at 100% of the mark-to-market value, whilst the liability is phased in over the expected period of the transaction as per IFRS 2. An adjustment was also made for specific once-off merger and acquisition costs in 2017. Adjusted headline earnings per share, before the Phase I B-BBEE share-based payment charge and related hedge, therefore increased by 25% to 553 cents per share (2017: 442 cents per share).
Read more in the Summary Consolidated Financial Statements: http://www.pioneerfoods.co.za//content/uploads/Pioneer%20Foods_Summary%20Consolidated%20Financial%20Statements_2018.pdf