Penalties flatten Pioneer dividend
Johannesburg – Pioneer Food Group is facing a
possible fine of R1.6bn for allegedly contravening competition laws in its
milling division, but has only made provision
to cover R154m in penalties.
was ordered to pay an
unrelated R196m fine for its role in a national bread cartel and has set aside a total of R350m for
administrative penalties, according to interim
results to end-March released on Monday.
about the pending fine has also compelled to firm to abolish paying an interim
dividend - 36c per share in 2009.
earnings per share dived 51.9%, down from 169.9c to 81.7c, largely on account
of the R350m provision.
the Competition Commission said it had referred
its investigation into the wheat and the white maize milling matters to the
Competition Tribunal. It listed Pioneer – which produces Sasko bread, Weetbix
breakfast cereal and Liquifruit juices – as one of the respondents in these
cases, together with other industry
The commission has recommended an administrative penalty
of R1.6bn - 10% of Pioneer's 2009 group revenue in both cases.
provision consists of an amount of R154m, applying a rate of 8.5% on the 2006
wheat and white maize affected revenue, and an amount of R196m for the bread
business," the company said.
believes the 2009 annual group revenue used by the commission
in determining the penalty in the milling matter is not the appropriate revenue
basis, and that the 2006 revenue should rather be used given the tribunal’s
judgment in the bread matter, and the fact that the alleged activities did not
take place after 2007.
also said the administrative penalties sought by the commission
in the milling and bread matters may be adjusted lower, depending on the
outcome of continuing negotiations.
Pioneer would raise the money if talks with the
commission did not yield the desired outcome, a spokesperson for MD André Hanekom said
the group preferred not to speculate on the matter. It has
renewed its cautionary statement, issued in
April after news that
the milling issue was being referred to
the background that the Competition Tribunal issued an order for the payment of
an administrative penalty of R196m as well as potential further or
increased penalties depending upon the outcome of investigations and
negotiations regarding alleged transgressions of the Competitions Act, the board deemed it prudent not to declare an interim
there is more certainty on the monetary effect of potential penalties, dividend
payments will be reconsidered."
A pensioner, only days prior to the news of the transgressions, I had purchased shares in both Kaap Agri and in Zeder.The purpose of the investment was to stabilise my income and secure my capital.Surely punishment should fall only on the responsible directors and managers. Why should new shareholders be called upon to shoulder the cost of reduced income and capital loss for these offences?