Pioneer disclosed at its annual general meeting that revenue for the year to September topped the R10bn mark for the first time. Net cash profit from operating activities also hit a record, passing R1bn for the first time.
Headline earnings topped R500m. The company said it achieved muted headline earnings per share growth of 1% despite “excellent” revenue growth.
Rising input costs could not be recovered fully, and this placed pressure on its operating margin, which declined from 7,7% to 7,1%. Pioneer said its debt level passed R1bn for the first time.
The group expected to spend R800m R1bn of its capital budget in the new financial year, said CEO Andre Hanekom.
Last year, the group spent R800m on expansion. The expanded capacity was required across the range of the group's products as the company had been undersupplying customers over the past two years, due mainly to unexpected growth in food consumption.
Hanekom said the bulk of the expenditure would go on baking, milling and pasta plants. A Weet-Bix plant would also get a fair share of spend, but the cash would be spread across the country and include other items such as logistics.
Funding expansion, the material increase in working capital as a result of growth and “significant” input price rises increased interest-bearing debt to 33% of equity by end-September.
Pioneer said that while this debt level was acceptable, its debt capacity and the capital programme required by growth demands meant it might have to list on the JSE to raise R1bn in new shareholder capital.
Hanekom said a listing was not vital to its capital plans, which would simply be rolled out at a slower pace if the company could not raise capital.
He said Pioneer was already operating in line with many of the bourse's listing requirements, and was close to being “ready” to list.
However, the group said it had been required to review this strategy as a result of global equity market volatility with the sub-prime crisis in the US.
In addition, the competition authority's investigation into alleged collusion on the prices of bread and flour “necessitated a review of how and when we move forward with this very important strategy”.
While the company was considering other avenues, it still believed a listing was the best way to raise capital.
Nedcor Securities analyst Syd Vianello said that until uncertainty on the possibility of a commission fine had been resolved, no investors were likely to put money into the company.
In addition, the company, which had low margins, would have to provide clarity on where its capital would be obtained for its growth plan, he said.
Pioneer said it had not yet received referral papers from the commission, which was expected this month.
Source: Business Day
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