Pioneer Food revenue up 10.5%

Johannesburg - Pioneer Food Group Limited [JSE:PFG] said in a trading update before its closed period that revenue for the eleven months to end August increased by 10.5% to R16.7bn with volumes contracting by between 2% and 4% on average in the group’s product basket as consumer spend remains constrained.

Price inflation on the group’s basket of products was estimated at some 13.5% for the period under review.

Substantial increases in operating costs continued‚ most notably in electricity‚ payroll and transport costs.

Grain prices have been volatile and are trending upwards again.

Maize prices are back at historical highs following lower than anticipated crop estimates caused by severe drought conditions in the USA.

The group’s closed period is from September 15 to the publication of the annual results for the 12 months to September 30 on or about November 26.

Volumes in wheat‚ maize and bread products have improved from June 2012 through lower average selling prices and judicious price point management in the respective categories.

Pasta volumes remained stable at constant prices in the face of continued imports of lower priced products and stiff local competition.

Growing price differentials between premium Thai rice and Indian rice allowed for stable price management and volume growth in the premium category of some 10%‚ capturing some market share.

Price discounting in the non-premium products led to volume increases of some 5%.

Consistent increases in raw material costs have necessitated price increases of some 10% in wheat and maize products with effect from September 2012.

Further price increases between 8% to 12% will be implemented in October 2012 in bread‚ maize and wheaten products.

Feeds volumes were stable with price increases recovering the higher raw material cost.

The broiler industry is experiencing unprecedented price and volume pressure. Measures to contain operating cost increases and improve efficiencies could not protect margins at lower sales volumes.

Good on-farm egg performance led to volume growth. Sales prices remained flat despite raw material cost increases placing pressure on margins.

Breakfast cereals performed well with good volume growth at constant selling prices.

Volumes in Moir’s biscuits responded well to lower price points and are performing to expectation.

Better than anticipated international raisin prices and favourable currency hedges‚ have mitigated the impact on earnings of the smaller raisin crop in the current financial year.

Volumes are under pressure in the ready-to-drink beverage categories due to constrained consumer spend‚ the colder than average winter season as well as cost increases of fruit concentrates.

As a result‚ sales prices of fruit juices increased by some 12% from July 2012.

Continued fierce competitor activity in the carbonated soft drink category had a negative effect on margins and led to lower than expected volume growth in the lower single digits.

Volumes in the fruit concentrate mixtures category continued to grow by double digits as consumers supported these products as more affordable alternatives to ready-to-drink products.

The Wadeville fruit juice capacity is installed and in operation as planned.

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