Grains 
 |
|
(R’million) |
2013 |
|
%
change |
|
| Turnover (Rm) |
10 948,6 |
|
10 052,7 |
|
9% |
|
| Operating income before abnormal items (Rm) |
1 918,9 |
|
1 689,7 |
|
14% |
|
| Operating margin (%) |
17,5% |
|
16,8% |
|
|
|
|
Salient features
 |
Good volume growth across most categories |
|
Strong volume and profit performance in Wheat Milling |
|
Bakeries remains a solid performer |
|
Successful integration of Pasta business |
|
Marketing investment increased by 25% |
The year under review
Operating income for the Grains division increased by 14% to R1,9 billion and the operating margin improved to 17,5% compared to 16,8% in the prior year.
The results for the year reflect a creditable performance in the competitive markets and challenging macro-economic environment in which the Grains business operates and demonstrates a second year of volume growth after some years of declining volumes.
The operating performance was primarily driven by volume growth combined with internal efficiencies and pricing restraint across most categories. In line with strategy, marketing investment was increased by 25% for the year under review to further enhance the sustainability of the businesses’ performance.
Milling and Baking
The Bakeries business remains an important contributor to operating income in this division. Whilst subject to ongoing pressure on raw materials, labour and distribution costs, the strategy of moderating price increases and focusing on internal efficiencies and ongoing innovation paid dividends. A reasonable level of volume growth for the period translated into satisfactory growth in operating income.
The Wheat Milling business was able to show a significant improvement in operating income as the volume growth and market share recovery, which had commenced in the previous year, accelerated during 2014. In addition, the environment allowed for some recovery in margins following the significant decline in the previous year.
 |
|
Noel Doyle
Business Executive: Grains and Nigeria |
|
After five successive years of volume decline and despite immense challenges in managing through an extremely volatile pre-harvest period, the Maize Milling business was able to report a satisfactory growth in income and a modest recovery in volume. The product enhancements after the successful completion of a capital project at Randfontein mill were well received by consumers.
The Sorghum and Maize Breakfast and Beverage business recorded the lowest level of operating income growth within the segment. Very strong volume growth in both Ace Instant and Morevite Breakfast offerings were offset by volume declines in Sorghum Beverages and Mabela, both of which were significantly impacted by strikes in the platinum belt.
Other Grains
The Rice business recorded a marginal improvement in operating income for the year, having achieved volume growth in the second half following a first half decline. The competitive environment has continued to intensify and the benefits of reduced Thai rice pricing over the past year have had to be passed on to customers in order to sustain volume levels.
The Pasta business recorded a very pleasing increase in operating income for the year. The correction of pricing into the second half of the year did see a significant slowdown in volume growth but corrected the decline in operating income reflected at the half year. Profitability is now at satisfactory and sustainable levels.
The Oats business produced a pleasing level of operating income growth, driven by a strong volume performance.
Outlook
The second half results whilst pleasing at an operating income level reflected a slowdown in volume growth when compared with the first half. All indications are that levels of consumer confidence and demand remain muted, whilst market share gains achieved are coming under pressure as competitors respond. However, despite ongoing cost pressures, particularly on imported commodities, labour and administered costs, we remain cautiously optimistic that further positive momentum in both volume and operating income can be sustained albeit at levels considerably lower than those reported for the current year. |
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