Pioneer: the rains fell, and so did profits
Unexpected weather, a drop in exports and a strengthening rand all added to Pioneer’s woes, but optimism remains
Even for the best-managed of companies things can go wrong. Pioneer Food Group, whose profits were hammered in its past financial year, found this out the hard way. Not one of Pioneer’s core divisions — essential foods, groceries or international — was spared a huge drubbing in the year to September. Group operating margin slumped from 11% to 6.5% and headline EPS (HEPS) tumbled 50%. "We signalled our confidence by holding our annual dividend unchanged," he says. "We hope to restore our operating margin to double-digit level in the current year. Let’s say to about 10%." Then the rains came, and fears of a shortage vanished. The maize price responded by more than halving to its current R2,200/t. The maize hedging position, says Carstens, was the biggest factor in the essential foods division’s R449m (36%) fall in operating profit to R800m. The division’s suffering has finally come to an end. The last of the maize hedging positions expired in May and the last of the hedged product was...
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