Paarl-based product distributor, Pioneer Food Group, is bracing itself for a stretch in the ‘lean streets’ after a tough start to its new financial year. Pioneer Food Group owns well known household brands like Sasko, Bokomo, Wellington and Liquifruit.
Last month the company issued a rather tepid trading update for the four months to end January. Group revenue for the four months increased only 8.1% if the contribution of struggling poultry operation Quantum Foods (set to be unbundled from Pioneer later this year) is excluded, but if the Quantum numbers are worked back then Pioneer’s four month turnover was only up 6.9%.
These increases are barely above the latest inflation rate and speaks volumes around how strained consumers currently are in South Africa. Pioneer CEO, Phil Roux, noted overall domestic volumes were flat given muted consumer spending and significant competition in certain categories. If there was any relief, it came with Roux’s admission that export volumes – fruit in particular – maintained good momentum.
“Significant and continued focus on cost reduction and efficiencies has had a positive effect on performance to date. The value enhancement initiatives embarked upon in the prior year are beginning to gain momentum.”
Roux said that Pioneer’s earnings at the half year were likely to benefit from these value enhancement initiatives. The company is also coming off a low comparative base in terms of profit performance. But Roux warned the outlook for the remainder of the current financial year was particularly challenging given the inflationary pressures facing consumers at present.
“This could potentially translate to volume pressure for the Group, compounded by rising input costs and rand weakness,” Roux concluded.