Pioneer seeks cost cuts even as profit gains

Johannesburg - Pioneer Food Group, South Africa’s second-largest food producer, said it will look to curtail costs as it sees the local environment “remaining difficult” amid high corn prices and a weak rand.

Profit rose 6.8% to R887.3 ($57m) in the six months ended March 31 from a year earlier, while revenue increased 5.9% to R10bn, the Paarl, Western Cape province-based company said in a statement Monday. The dividend climbed 11% to R1.05 a share.

Pioneer, which has brands including ProNutro cereal, Sasko bread and Ceres juices, operates mainly in South Africa, whose rand was the worst performer against the dollar among major currencies in the six-month period under review, losing 6.2%. The country’s worst drought in more than a century has cut production of raw materials including wheat, while local corn prices surged to a record in January.

“Significant raw-material price inflation, as a result of the drought and the rand’s weakness, saw a decline in corn volumes,” it said. “The external environment is likely to remain difficult for the near future. There is sufficient scope to enhance efficiency and curtail costs across the value chain.”

The stock rose 4.1% to 164.60 by the close in Johannesburg, the most in five weeks, giving the company a market value of R38.2bn. Tiger Brands is the nation’s biggest food producer, with a market capitalisation of R64.9bn.