February 9, 2018 / 6:11 AM / 4 months ago

Price deflation in soft commodities hit Pioneer Food's turnover

JOHANNESBURG, Feb 9 (Reuters) - South Africa’s Pioneer Food Group reported on Friday a 2.4 percent drop in turnover for the three months ended December, largely due to sales price deflation in soft commodities.

“Maize price realisation contracted materially with wheaten products and rice also seeing deflation, albeit to a lesser extent,” the firm said in a statement.

Excluding Nigeria, group turnover fell by 3.3 percent.

The company, which produces Weet-Bix cereal and Liqui-Fruit juice, said South African revenue declined by 5.2 percent, while revenue from the group’s international business — including South African exports — grew by 19.5 percent.

Pioneer is recovering from an El Nino weather pattern, which ended in 2016. It triggered drought conditions across the southern African region that hit the staple, maize, and other crops.

The group said its short-term strategy remains focused on restoring the health of the core portfolio and delivering a substantial recovery on the weak 2017 performance.

“The improved sales volume performance and normalisation of raw material cost positions (most notably in respect of maize) should support higher first half margin and profit compared to the corresponding period,” it said.

With the group having considerable operations in the water-crisis hit Western Cape, it said contingency plans have been developed to ensure sustained supply of products.

South Africa’s second largest economic hub and tourism attraction, Cape Town, is struggling with a severe drought that could see taps turned off in May. (Reporting by Nqobile Dludla; Editing by Amrutha Gayathri)

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