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OPERATIONAL REVIEW |
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Snackworx |
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 The Bakers, Pyotts and Baumann’s brands are an iconic part of South Africa’s biscuit history. Combined with
the full snack portfolio under Willard’s a full range of sweet and savoury biscuits and baked and fried snacks is
offered to the snacking consumer.
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“Packaging for the
key Bakers and
Pyotts brands was
updated during the
year and there
are a number of
other innovations
in progress.” |
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Revenue growth of 20,3% for the
year reflects higher selling prices
achieved as well as volume growth of
4,2%. Price increases were implemented
in response to sustained high raw
material prices, particularly flour, palm
oil, shortening and butter. Despite this,
gross margins came under pressure and
decreased from 41,8% to 39,4%. Increased
volumes off the fixed cost base gave some
operating leverage which largely offset
the lower gross margins. Operating profit
margin decreased from 11,2% to 11,1%.
Operating profit increased by 18,5% from
R156,8 million to R185,8 million.
Biscuit revenue increased by 22,1% due to
volume growth of 4,1% and price increases
necessitated by sustained high commodity
prices. The biscuit category is benefiting
from the new high capacity biscuit line
and packaging equipment at Isando which
provides additional capacity on key value lines and has materially improved service
levels, particularly for Bakers Tennis
biscuits. Demand growth slowed in the
second half of the year but remains sound.
A new marketing team has re-energised
the focus on delivering the potential of
our very strong biscuit brands. Packaging
for the key Bakers and Pyotts brands
was updated during the year, a range of
Bakers premium biscuits was launched
towards the end of the year and there are
a number of other innovations in progress.
The biscuit factories at Isando and
Westmead both re-organised their
employee shift patterns in January to
improve working hours and lay the
foundation for better continuity on shift changeovers which should enhance
yields and capacity in future. In the short
term these changes have been disruptive
resulting in reduced operating efficiency in
the second half of the year.
Revenue from the snacks category
increased by 15,6% with volume growth of
4,5%. As with biscuits, higher raw material
prices put significant pressure on margins
in this category, resulting in the first real
price increases in several years. Operating
margin, while positive, remains constrained
by the strong competition in this category.
Further selling price increases were
implemented post 30 June 2008 as a consequence of wage increases and
sustained high raw material, packaging,
transport and energy costs. In conjunction
with increasing pressure on consumers
this could dampen demand growth in
2009. However, as noted above, there
remain material opportunities to improve
production yields and there are indications that some commodity prices have started
reducing from their highs, which may ease
the pressure on margins in the latter part
of the 2009 financial year.
Capital expenditure includes the
completion of the new biscuit line and
packaging equipment at Isando. |
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| Snackworx |
2008
Rm |
2007
Rm |
2006
Rm |
2005
Rm |
Change
08 vs 07
% |
| Revenue |
1 677,2 |
1 394,2 |
1 279,7 |
1 177,3 |
20,3 |
| Operating profit |
185,8 |
156,8 |
127,0 |
105,4 |
18,5 |
| Operating margin (%) |
11,1 |
11,2 |
9,9 |
9,0 |
(0,9) |
| Capital expenditure |
58,3 |
47,3 |
59,2 |
41,6 |
23,3 |
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