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PIONEER FOOD GROUP LIMITED - Trading Update For The 3 Months Ended 31 December 2017

Release Date: 09/02/2018 07:05
Code(s): PFG     PDF:  
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Trading Update For The 3 Months Ended 31 December 2017

Pioneer Food Group Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1996/017676/06)
(Share code: PFG)
(ISIN code: ZAE000118279)
(“Pioneer Foods” or “the Group”)

TRADING UPDATE FOR THE 3 MONTHS ENDED 31 DECEMBER 2017

Total volumes are 5.2% higher (4.6% excluding Nigeria) while Group turnover has decreased by
2.4% (3.3% excluding Nigeria) largely due to sales price deflation in soft commodities. Maize price
realisation contracted materially with wheaten products and rice also seeing deflation, albeit to a
lesser extent.

The Group’s South African business, excluding exports, delivered a solid performance despite
the challenging economic backdrop and intensified competition by delivering volume growth of
4.7%. South African revenue declined by 5.2% largely due to sales price deflation in soft
commodities.

Revenue from the Group’s International business, including South African exports, grew by a
pleasing 19.5% (12.1%, excluding the Nigerian business). The Nigerian joint venture was not
consolidated for the corresponding previous period.

The increase in sales volumes resulted in Pioneer Foods gaining market share, confirmed by the
growth in our composite corporate market share in top end South African grocers on a three-
month basis ending December 2017 (Nielsen’s data).

The improved sales volume performance and normalisation of raw material cost positions (most
notably in respect of maize) should support higher first half margin and profit compared to the
corresponding period. The improvements will be partially offset by the underperformance in the
wheaten value chain as well as price promotional related margin pressure.

The maize business delivered a strong performance with White Star regaining market share within
a category that has seen high single-digit volume growth for the three-month period under review.
The wheaten value chain, including bakeries, however faced a challenging trading environment
which was partly as a result of consumers switching from bread to more affordable maize meal,
as well as intensified price promotional activity. The additional bread capacity in Kwazulu-Natal
which was successfully commissioned in December 2017, will enable more effective participation
in the coastal region.

The Weet-Bix, Liqui-Fruit and Ceres brands posted excellent performances during the reporting
period with double-digit revenue growth. This was mainly as a result of participation in major
retailer promotions as well as solid growth in the independent wholesale market.
Beverage exports performed better than expected, but volume growth remains challenging due
to currency volatility and the prudent credit management policies in place. Fruit export volumes
improved given the higher levels of stock available for sale compared to the prior comparative
period.

Further afield, the UK cereals business, mainly granolas, is showing good growth and should start
to see the benefits of the recent acquisition of the Lizi’s granola brand; while the Nigerian business
is reporting positive growth in both sales volume and pricing.

The Heinz joint venture did not perform to expectations prompting corrective actions. Regulatory
finalisation of Pioneer Foods’ acquisition of the remaining stake in the joint venture is expected
during March 2018.

The Group’s short-term strategy remains focused on restoring the health of the core portfolio and
delivering a substantial recovery on the weak 2017 performance. We, however, remain mindful
of the major detractors in the wheat and baking value chain, as well as concerns around the
performance of the Heinz SA business which is currently being repositioned. The international
business will also stand to be impacted by the stronger Rand. It is expected that the overall trading
environment will remain competitive.

The Group has considerable operations in the Western Cape and in light of the widely-reported
water crisis in the region, contingency plans have been developed to ensure sustained supply of
products. In addition to a continued containment in overall water consumption, a number of
contingencies, have been put in place to limit the impact of the water crisis as far as possible.

The financial information contained in this trading update, has not been reviewed or reported on
by the Group’s external auditors.

Tyger Valley
9 February 2018

Sponsor
PSG Capital (Pty) Ltd

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