Pioneer Foods to spend R900m

Cape Town - Western Cape-based consumer brands giant Pioneer Foods will spend more than R900m in capital expenditure (capex) in the year to end September 2009 to "facilitate the next level of earnings ability".

Writing in the recently-released annual report, Pioneer chairperson Boy Blanckenberg said the company's main focus was expanding and improving production facilities in the white maize meal, biscuit, rice and non-alcoholic beverage categories.

Some capital would also be allocated to the egg (Nu-Laid) and broiler (Tydstroom) businesses to optimally position these businesses for sustained profitability, he said.

Pioneer is one of South Africa's largest food producers, and holds well-known brands like Sasko, Bokomo, Marmite, Redro, Pepsi, Liqui-Fruit, Pro-Nutro, Wellington, Weet-Bix and Safari.

While Pioneer's capex programme looks fairly strenuous, the annual report does show that the company's gearing has eased markedly from 34% in the 2008 financial year to just 14% in financial 2009.

This was after cash generated by operations improved by about R500m to R1.9bn in the 2009 financial year.

Looking ahead to the new financial year, Blanckenberg forecast that Pioneer's operating profit would be influenced by volatility in raw material prices, cost increases (mainly salaries, wages, electricity and transport costs), changing consumer spending patterns and deflation.

Sasko, the main profit generator in Pioneer, remained well positioned for further growth "albeit at a slower rate given the relatively high comparative base".

Blanckenberg said the other Pioneer businesses should further unlock their potential to improve contributions to earnings.

- Fin24.com