Tiger Brands reports 17% decline in full year earnings despite growth in revenue

SOUTH AFRICA – Tiger Brands, JSE listed packaged food processor has reported a 17% decline in its headline earnings per share for the year ended 30 September 2019 to 1 349c, compared to 1 633c reported in 2018.

HEPS is the main profit measure in South Africa and strips out certain one-off items.

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The company however managed to increase revenue by 3% to R29.2bn.

Operating income declined 20% to R2.6bn, excluding the impact of the value-added meat products business, the group operating income would have only declined by 11% to R3.2bn.

The overall result was significantly impacted by ongoing margin compression across the Grains portfolio, tough trading conditions in the group’s primary export markets and the slower than anticipated recovery of the value-added meat products business.

In the grains portfolio, revenue increased by 4% to 13.2 billion rand, reflecting price inflation of 6%, while overall volume declined by 2%.

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“Price inflation was insufficient to offset the impact of higher input costs, with operating income declining by 24% to 1.4 billion rand,” the food producer said.

During the period, the group closed Deli Foods, in Nigeria, which had been loss-making. “The process is expected to be concluded in the next few months,” the report read.

The food and beverages company, which owns brands such as value- added meat products manufacturer Enterprise and baby products Elizabeth Anne and Purity was also affected the listeriosis outbreak impacting its processed meats business.

Full-year revenue from its Value-Added Meat Products (VAMP) business, dived 39% to 654 million rand ($44.48 million), while the company also incurred an operating loss of 547 million rand.

Tiger Brands is exploring the sale of its processed meats business, which was temporarily closed last year following the world’s largest ever listeria outbreak that has negatively impacted the performance of its meat business.

The company is facing a class action lawsuit over its role in the incident, in which a listeriosis outbreak that killed more than 200 people in South Africa was traced back to a factory run by Tiger Brands-owned Enterprise Foods.

The food producer said its Value-Added Meat Products (VAMP) division had been earmarked for review prior to that event, and that the review had concluded it was “not an ideal fit” within the portfolio, reports Reuters.

In a statement Tiger Brands highlighted that it had started formal due diligence on Nov. 6 after receiving “several indicative offers”. It will further evaluate its options once the process is completed.

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