South Africa’s Pioneer Food Group has revealed pressure on sales volumes “in a number of categories” but forecast an improved performance in the second half of its financial year.
In a trading update for the four months to the end of January, Pioneer reported a 5.1% rise in group turnover but admitted a boost from inflation and said volumes had “contracted” in some parts of the business.
The company said its turnover in South Africa was up 7.6% but admitted its international sales declined 10.3%.
Pioneer, which owns brands including Sasko bread and Weet-Bix cereal, said its groceries division had been “negatively affected by lower volumes consequent to softer trading conditions, increased competition and significant cost-push inflation”.
Amid what Pioneer called “the worst drought” in South Africa “in decades”, the company decided to guarantee supply for its domestic maize meal brand White Star despite high raw material costs and a volatile rand. Pioneer said it had grown sales by value and seen market share expand but admitted it expected “a significant profit impact” in the first half from what was an “expensive procurement position relative to market pricing”.
Pioneer’s international business faced “strong headwinds”, including volatile currencies, weak consumer demand on the African continent, a shortfall in the raisin crop and “significant juice concentrate cost push”, which have all hit the company’s profitability.
However, Pioneer said the outlook for the second half of the financial year “should reflect an improved performance”. It pointed factors including to an improvement in profits from maize, a “satisfactory” raisin crop, new Weet-Bix capacity coming on-stream and “cost respite” on key inputs.
In November, Pioneer struck a deal to buy a 49% stake in the east African business of UK breakfast cereal group Weetabix. The company said on Friday alongside its trading update it was awaiting final approval on the transaction from Kenyan competition officials.