Essential Foods is a leading manufacturer of essential and value-added foods in South Africa and comprises two business units – Grains and Bakeries.

Business environment

Prices of soft commodities remain driven by supply and demand dynamics currently characterised by good global inventory levels. Exchange rate volatility continues to impact local prices. The latter part of the fiscal year witnessed a sharp fall in maize pricing with a concomitant increase in competition. Consumption levels at an industry level were notably suppressed within most essential foods categories.

Performance overview

Essential Foods delivered satisfactory overall year-on-year operating revenue growth, with particularly strong second-half performance in the bread category. Operating profit increased significantly despite a challenging business environment, with value creation initiatives such as further rationalisation of the bakery footprint, manpower reduction and overall prudent operating cost management contributing to expanded operating margins.

The major capital expenditure projects of recent years were completed in 2014. The state-of-the-art Shakaskraal bakery in KwaZulu-Natal achieved planned hurdle rates post commissioning and has resulted in improved market penetration. The consolidation of the Malmesbury and Paarl mills will reach completion in the first quarter of the new financial year.

New brand campaigns were developed for both Sasko bread and White Star maize meal which are expected to have a positive impact on the market position.

Financial performance

Financial performance

Production footprint

Production footprint

Revenue contribution

Production footprint

Sustainability progress

  • Distribution fleet for bakeries on track to be replaced by more fuel-efficient vehicles by the end of 2016
  • All product information, including full genetically modified organisms (“GMOs”), responsibly disclosed on product labels
  • Voluntary elimination of legal, but objectionable, substance (ADA) from all bread recipes
  • Product life cycle assessment performed on White Star super maize meal
  • Woodchip boiler at Shakaskraal and Claremont bakeries using sustainable heat energy commissioned

More information on Pioneer Foods’ sustainability approach, performance and prospects can be found in the sustainability report.

Innovation

Revitalising the much loved Sasko bread brand, and accompanying marketing campaign.

Outlook

The focus for 2015 will be to maintain the levels of operational discipline, cost management and margin precision achieved during the year. The rationalisation of the bakeries’ manufacturing footprint, value creation plans, added contribution of the consolidated Malmesbury and Paarl mill and closure of Polokwane mill are all expected to have a positive impact on operating efficiency.

The Group will continue to invest in supporting power brands to drive performance in search of market share in a low-growth environment. Priority will be given to bedding down the new management structure and maintaining the execution of the Group strategy.

Product images