Pioneer unveils R1bn expansion plan

6 January 2011

South African diversified food company Pioneer Foods is to spend an estimated R1-billion on capital expansion in 2011/12.

The funds will be used to complete projects under construction, new expansions and necessary replacements, with a focus on improving production facilities in the white maize meal, biscuit, rice and non-alcoholic beverage categories.

“Capital will be spent, earlier than previously estimated, to expand the capacity of the pasta facility to cater for increased demand, as well as the strategic expansion of the broiler business through an acquisition in Gauteng,” Pioneer chairman Zitulele Combi said in the company’s annual report.

The company also reported that revenues for the past financial year declined by three percent to R15.7-billion, mainly as a result of sustained deflationary pressures on selling prices, across almost the entire range of the company’s products.

Competition Tribunal settlement

In November, the company entered into a settlement with the Competition Tribunal for price-fixing in the bread industry.

It was fined R500-million, in addition to an administrative penalty of R196-million, while also agreeing to reduce the gross profit on its flour and bread products by R160-million.

As part of the agreement, the company had to maintain its committed capital expenditure of R1.228-billion from 2010 to 2013, while also committing to further increase its capital expenditure over the period by R150-million.

In December, Pioneer made an offer to buy out local brandy and winemaker KWV for about R828-million as part of its diversification plans. That deal is still subject to shareholder approval from KWV shareholders, as well as the necessary regulatory authorities.

SAinfo reporter

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