Pioneer fine to help start new fund

Johannesburg – Pioneer Food Group [JSE:PFG] has been slapped with a record-breaking fine for anti-competitive behaviour in a deal that will also see it pay for a new fund aimed at promoting competitiveness within the agro-processing business sector.

On Tuesday the competition commission imposed a staggering R500m fine on Pioneer, the highest penalty it has imposed on a company, as part of a settlement to conclude investigations into the company's wheat milling, baking, poultry and egg business.

The fine excludes the R196m penalty imposed by the competition tribunal in April 2010, after Pioneer was found guilty of collusion in a bread price-fixing cartel.  

Pioneer was also asked to adjust its pricing of flour and bread to reduce its gross margin by R160m when compared to the similar period in 2009/10.

Half of the R500m will go towards the creation of an agro-processing competitiveness fund to be administered by the Industrial Development Corporation (IDC).

The commission said the aim of this fund is to promote competitiveness, employment and growth in food value chains. It will provide finance on favourable terms to small and medium enterprises.

“The commission welcomes Pioneer's approach, as evidenced in this agreement, to resolving the matters and agreeing to undertakings aimed at a more competitive and dynamic economy in these crucial sectors,” said competition commissioner Shan Ramburuth.

Pioneer pledged to cooperate with the commission in ongoing investigations and prosecutions of the cases related to the settlement.

Markets seemed relieved with the fine. Pioneer shares closed 1% up at 5 000 cents.

It had been feared the commission would fine the food group nearly R1bn for its lack of cooperation on the bread price-fixing matter, which involved Tiger Brands, Premier Foods and Foodcorp.

Though the fine is less than expected, Pioneer has since cautioned that its earnings per share and headline earnings per share for the year ended September 2010 will likely decrease between 80% and 95% from the previous corresponding period.

The group said the decrease is as a result of an additional provision of R464m to be raised for the year under review, following the settlement with the commission.
 
Pioneer had defiantly made provision for R350m, insisting it was innocent until the tribunal findings, which resulted in a boardroom exodus.

 - Fin24