Tiger Brands revenue declines 9% hurt by listeria crisis and a weak economy

SOUTH AFRICA – Tiger Brands, South Africa’s biggest traded packaged-food company has posted 9% decline in revenue to US$2.06 billion as it struggles to recover from listeria outbreak and a weak consumer spending.

According to Moneyweb, operating income in the year ended September fell 28% to US$239.56 million while headline earnings per share (HEPS) shed 26% to 1,587 cents per share.

The firm which is also the largest listed packaged food producer on the continent saw a drop in profits impacted by inventories written down and increase in expenses.

Tiger Brands had earlier indicated that it had incurred a US$25 million loss associated with recall measure issued as a result of the listeriosis outbreak that was linked to some of its processing facilities.

This included the shutdown of its ready-to-eat meat processing facility, Enterprise Foods in Germiston and Polokwane facility.

“The suspension of operations at VAMP contributed 4% to the volume decline. The balance of the volume decline reflected a worse than expected performance in Groceries and Home and Personal Care,” said Tiger Brands in a statement.

At an aggregate level, however, the VAMP division induced an abnormal loss of US$30.59 million.

Revenue in Consumer Brands (Food) declined by 3% as volume shrunk driving down operating income (excluding VAMP) by 8% to US$79.73 million.

Internal segment still struggling

Total revenue for the exports and international businesses dropped by 10% to US$275.38 million.

Revenue in the fruits division declined 20% due to lower volumes and a drop in fruit yields following the severe drought in the Western Cape, incurring an operational loss of US$9.27 million.

Cameroon subsidiary Chococam recorded 3% growth in revenue but Deli Foods further deteriorated with an operating loss of US$3.69 million.

In Nigeria, Tiger Brands’ Deli Foods continued to struggle devalued naira and a sluggish economy while in Kenya, the company exited the market by disposing of its 51% stake in the local unit, Haco Tiger Brands, to local billionaire Chris Kirubi. “The Africa strategy now is building on what we have.

We are now focusing on ensuring that we have increased penetration of our brands from South Africa onto the rest of the continent,” said Nikki Catrakilis-Wagner, investor relations director at Tiger Brands.

“By exiting Haco (in Kenya) that opens us the way for us to export our products in to those markets more aggressively.”

Oceana unbundling

Tiger Brands said it is looking to spin off its 42 percent stake in fishing company Oceana Group, worth US$330 million, to focus on growing its food and drinks business.

The company which makes bread, breakfast cereals and energy drinks is aiming to return its core operations to profitable growth.

“It’s about being more focused on our core portfolio and giving as much attention as possible to growing our core brands,” chief executive Lawrence Mac Dougall told reporters.

“We believe this will deliver high double digit growth over the next few years for us at a margin that is accretive to our South African business.”

Its strategic review involves expanding into Africa, that is in Kenya, Nigeria and Central Africa.

According to Mac Dougall, this involves a ‘route-to-market’ model as opposed to acquisitive growth.

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