SOUTH AFRICA – Tiger Brands, a South African packaged food company, has reported a decline in profits in the six months to end-March following the 2018 listeriosis outbreak that has negatively impacted the performance of its meat business.
The food producer said that processed meats business plunged 79% to US$14.74 million (R213m) while revenues from continuing operations fell 2% to US$1.07 billion (R15.4bn) during the period under review.
The value-added meats business, which had to shut factories following the listeriosis outbreak, faced difficulties with its relaunch, “which affected service levels” resulting to an operating loss of operating loss of US$20.48 million (R296m).
The group’s total net profit in the first six months declined 1% to US$96.89 million (R1.4bn), while headline earnings fell 11% to US$89.97 million (R1.3bn) which it also partly attributed to weak revenues from outside South Africa.
“The trading environment remained difficult, with continued pressure on consumer spending, resulting in sales volume increases in the domestic business while low price inflation impacted margins,” the group said.
Revenues from exports and international operations fell 11% to US$117.65 million (R1.7bn) which was attributed to lower export volumes and price deflation in international markets.
Tiger Brands’ chief finance officer, Noel Doyle said the value-added meats business would not reach break-even by the end of the year to end-September, reports Business Day.
In addition, Lawrence MacDougall, Tiger Brands’ chief executive, said that the group is also facing challenges in passing higher input costs onto consumers in the next 12 to 18 months.
Considering the risk to margins of low selling price increases and rising costs, “it’s going to be critical for us to get that under control”, he said.
Tiger Brands said it also wrote off goodwill of US$6.92 million (R100m) in beverages and seasoning business Davita to protect its key export markets.
“This arose as a result of the consistent risks associated with key export markets, with lower sales projected for Nigeria and Mozambique, as well as lower sales forecast for the powdered seasoning brand, Benny.”
The unbundling yielded an unrealised fair-value gain of US$110.73 million (R1.6bn), which would be excluded from headline earnings.
The Johannesburg Stock Exchange (JSE) group, which now faces a class-action lawsuit- which it plans to defend against – has seen about 42% loss in share’s value since the listeriosis outbreak in March 2018.