The weakening of the Rand by 35% in the first half the year impacted on Pioneer Foods’ raw material costs, which were mainly based on import parity.
But the Paarl-based company’s ability to contain costs at below inflation, together with macro factors, contributed to better end-of-year figures for the period to September 2002, according to MD Andre Hanekom.
These large cost increases led to above inflation increases in sales prices and although revenue increased by 31% to R6.5bn (US$714m), the group was not able to fully recoup these increases, and gross profit margins actually declined.
Last year the company experienced a decline in profit and from that low base headline earnings were up by 75% to R234m.
The total dividend for the year rose by 80% to R54m. The higher raw material costs and selling prices, however, necessitated an additional investment of R234m in working capital, which meant cash from operations declined by R297m, according to Hanekom.
These factors, as well as the purchase and incorporation of Wellington-based food and beverage company SAD earlier in the year, weakened the company’s debt ration from 10% to 37%. Cash profit from activities rose to R513m and Hanekom was confident that the bigger debt could be “comfortably” serviced from the sustainable cash flow. More than 40% of SAD’s revenue was generated in foreign currency and the results of the first few months had already exceeded projections and looked promising for the new year, said Hanekom.