Price deflation in maize pushed Pioneer Foods Group’s turnover down 4% in the 10 months ended July, Pioneer said in a trading statement on Tuesday.
Pioneer Foods is one of South Africa’s largest producers and distributors of a range of branded food and beverages, trading mainly across SA, providing wholesale, retail and informal trade customers with products. The consumer slowdown hit the entire South African retail industry, with retail stores producing modest gains relative to the prior period.
Pioneer expects improved performance in the second half of the year but said improved performance has materialised at a slower rate than anticipated due to a significant slowdown in the local economy, aggressive price-based competition and the lowest international prices recorded for raisins in seven years. In addition, African exports have also shown no signs of recovery and largely contributed to turnover decline. Pioneer’s international business represents 21% of operating profit, with food exports to more than 60 countries across the globe.
The company said it would be judged on its ability to increase markets share in a contracting environment, a restoration of margins and overall financial performance in relative terms. As the medium term growth outlook for South Africa remains constrained.
“Management is positive that 2018 will see a recovery opportunity for the company at large. Brand strategies are robust, investment in growth assets is opportune, and a recurrence of the 2017 anomalies is unlikely for the 2018 fiscal,” Pioneer said. Overall, the retail sector is expected to remain weak but some analysts expect consumers to loosen their purse strings and start spending, following the recent interest cut by the Reserve Bank.