Civil unrest, Industrial action bite Tiger Brand’s earning, registering 1% decline in revenue

SOUTH AFRICA – Tiger Brands, South Africa’s biggest food manufacturer has reported its revenue for the quarter ended 31 December 2021 was down 1%, driven primarily by three categories.

According to the JSE listed fast moving consumer goods manufacturer, its bakeries segment experienced significant volume losses as a result of intense price competition, compounded by rising cost pressures and illegal work stoppages in October and November.

Snacks & Treats was impacted by supply challenges due to an 8-week labour disruption in November and December, compounded by low opening stocks of finished product because of the civil unrest experienced in July 2021.

The impact of the industrial action at an operating income level, amounted to R120 million for the three months to December 2021.

Although the Snacks & Treats business has made significant progress in restoring supply, it is anticipated that full supply will only be achieved in July 2022.

On a flip, marginal recovery in Snacks & Treats, as well as a slower rate of decline in Bakeries in January, resulted in group revenue from continuing operations for the four months to 31 January 2022 showing an increase of 1%.

Meanwhile, rice prices deflated significantly driven by the decline in international prices.

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Excluding these three categories, the balance of the portfolio delivered revenue growth of 3%, comprising 1% volume growth and price inflation of 2% in the quarter under review.

Pleasing performances were achieved in Groceries, Beverages, Baby and Chococam, whilst weak category demand due to unfavourable weather conditions impacted insecticide volumes within Home Care. In addition, disappointing first quarter sales into Nigeria adversely affected Exports.

“The company has not been immune to the global supply chain squeeze. We have experienced challenges in managing raw material, ingredients and packaging availability, timeous supply, as well as significant cost increases.

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“The inability to pass through unanticipated cost push resulted in margin compression in the first quarter. This is likely to be ameliorated in the second quarter as selling price increases are being implemented. The impact of these price increases on volumes is being carefully managed,” stated Tiger Brands.

The poor start to the financial year makes it imperative that its ongoing focus on cost saving initiatives and supply chain efficiencies be accelerated. In addition, distribution gains on product innovations are gaining traction.

With regards to bread, the immediate priority according to the company is to recover the significant market share losses, facilitated by optimal pricing and effective promotional activity.

However, profitability in this category is likely to remain under pressure for the remainder of the year. Improvements in revenue management are being accelerated across the portfolio.

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