Pioneer Foods (PFG) – Dazed by Maize

Poor maize profitability, led by high white maize cost pressure, accounted for 60% of PFG’s -27% y-y decline in operating profits. Looking at wheat and white maize commodity prices and futures contracts, there may be some cost relief ahead but not enough to ease double-digit inflation in maize costs. SARS rice import data shows that PFG may have to contend with higher rice prices in 2H19. On rice, we find the 2Q19 market leadership of Spekko encouraging and evaluate the market share growth of the brand along with its relative pricing to Tiger Brands’ Tastic over the long-term.