Operational review

Revenue increased by 10% to R17,0 billion, reflecting average price inflation of 13%, offset by overall volume declines of 3%. Operating income recorded a decline in the second half relative to the same period last year, driven by all segments except Maize, and Oat-based Breakfast (Jungle), as most segments experienced higher conversion costs compounded by adverse product mix. As a result, operating income for the year ended 34% lower at R838 million.

Revenue in Milling and Baking increased by 8% to R11,5 billion, as price inflation of 13% was offset by a 5% volume decline. While bread volumes and market shares increased in line with the intended strategy, realisations and profit margins were negatively impacted by adverse channel mix, with volumes in the general trade declining. The Bakery business was also impacted by the significant incremental cost of loadshedding versus prior year (R69 million in FY23 vs. R18 million in FY22) and higher conversion costs due to higher wages and utilities.

Lower wholesale and retail wheat volumes were partially offset by higher inter-company volumes, while operating income within this segment was adversely impacted by unfavourable customer mix and higher costs of distribution.

Maize's performance was adversely impacted by continued volume pressure driven by overall category declines and aggressive competitor pricing, particularly in private label. This was partially offset by lower conversion costs driven by lower generator utilisation and resultant diesel cost-saving in the second half. The Sorghum-based Breakfast and Beverages business delivered a muted performance, impacted by supply challenges and lower demand as a result of multiple price increases to offset the exponential increase in sorghum. Overall, Milling and Baking's operating income declined by 25% to R602 million.

Revenue in Other Grains grew by 14% to R5,5 billion, as all categories benefited from improved pricing, while Rice reported improved volumes year-on-year. While the Oat-based Breakfast (Jungle) segment reported pleasing operating profit growth, adverse product mix, higher raw material and distribution costs, and sub-optimal factory performances in the Rice and Pasta segments adversely impacted overall profitability. Operating income declined 50% to R235 million.

Following poor price/volume management in Rice in the first half, pleasing progress was made in restoring underlying profitability, particularly in the last quarter. Overall, a solid volume performance was sustained despite high levels of price increases required in the second half to restore margins.