Pioneer faces pressure despite improvement. The branded food producer has reported a big improvement full-year earnings

but said pressure started to emerge in the second half.

Pioneer Foods has bounced back from a weak 2017 to report improved earnings.

That's despite weakening consumer demand and rising input costs due to a

softer rand.

The branded food producer says a much better maize harvest supported profit

growth in the year to end-September but the milling and baking segments of its

Essential Foods division came under pressure in the second half of the year

due to intensified competition and as consumers traded down to cheaper staple

products. This was specifically evident in maize meal during the final quarter

with White Star trading at an all-time high price premium to other brands in

the category. Its bakeries business benefited from improved operational

efficiencies and it said pasta, rice and legumes continued to make a growing

contribution to earnings.

Within its Groceries division, Pioneer grew volumes in its cereal and long-

life fit juice categories. Operating profit was also supported by baking and

spreads. However, lower volumes and profitability were reported by the

snacking category, including dried fruit and rusks. LiquiFruit, Ceres and

Fruitree all gained market share, while Weet-Bix maintained its share. It said

the integration of the former Heinz Foods SA portfolio was well advanced.

Internationally, exports into Africa continued to be subject to volatile

socio-economic conditions, while fruit exports benefited from improved local

fruit availability, strong global demand and high US dollar prices. It said

the recent acquisition of UK granola brand Lizi's had supported growth in its

international branded products business.

For the year, revenue rose 3% to 20.2 rand billion and adjusted operating profit

jumped 26% to 1.6 rand billion. Adjusted headline earnings per share rose 25% to

553c and its maintained its final dividend at 260c, taking its total dividend

for the year to 365c per share.

Pioneer said its Groceries and International divisions should be able to

improve their performance in the year ahead following a turnaround at Heinz,

an expected higher vine fruit crop and a more beneficial rand exchange rate

for exports.

Although demand for maize meal products should remain strong, given ample

local raw material supply and relative consumer value, down-trading within the

category is expected to continue," the person who said it here which is red

"The exceptional maize profit contribution reported in the first half of the

2018 financial year is not expected to be repeated in the next financial

year."

Its shares closed 1% higher at 78.29 rand yesterday.

Pioneer Food Group Earnings:

-FY REVENUE INCREASED BY 3% TO 20.2 rand BLN

-FY HEADLINE EARNINGS PER SHARE INCREASED BY 33% TO 545 CENTS PER SHARE

- A GROSS FINAL DIVIDEND OF 260 CENTS (2017: 260 CENTS) PER SHARE HAS BEEN

APPROVED

-- Nick Kunze (@NickKunze2) November 19, 2018