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.
Pioneer
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.
Uncertainty about the pending fine has also compelled to firm to abolish paying an interim dividend - 36c per share in 2009.
Headline earnings per share dived 51.9%, down from 169.9c to 81.7c, largely on account of the R350m provision.
In March, 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 participants.
The commission has recommended an administrative penalty
of R1.6bn - 10% of Pioneer's 2009 group revenue in both cases.
"This
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.
Pioneer
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.
Pioneer
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.
Asked how 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 tribunal.
"Against
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
dividend," said
Pioneer.
"Once there is more certainty on the monetary effect of potential penalties, dividend payments will be reconsidered."
- Fin24.com