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Trading update : First quarter ended 31 December 2014
TIGER BRANDS LIMITED
“Tiger Brands” or “the Company”
(Incorporated in the Republic of South Africa)
(Registration number 1944/017881/06)
Share code: TBS
ISIN: ZAE000071080
Trading update : First quarter ended 31 December 2014
The group has continued to execute against its stated strategies by focusing
on the strength of its brands and on its cost base. However, tough trading
conditions persist both domestically and on the balance of the continent.
Turnover for the first quarter ended 31 December 201 4 amounted to
R8,2billion, reflecting a 7% increase compared to the corresponding period of
the prior year.
Volumes in the domestic businesses have moderated as the cumulative effect
of price increases taken over the past year to recover input cost p ressures has
impacted on consumer offtake. These input cost pressures have been
exacerbated by the depreciation of the Rand. Notwithstanding this, the
market shares of the company’s core brands have remained resilient, although
competitor activity generally remains intense throughout the business. Bakery
volumes were negatively affected by a five week strike in the KZN region,
which occurred during October and November 2014. Operating margins and
profitability in the Groceries business continue to impro ve and, whilst volumes
and market shares in the Home and Personal Care business remain strong,
pricing activity remains intense and continues to weigh down on the operating
margins of this business.
Dangote Flour Mills has achieved positive volume momentum and operating
leverage due to tight cost control and improved efficiencies in line with its
stated recovery plan. Its results, however, have been negatively affected by
foreign exchange losses on its foreign currency borrowings following the recent
devaluation of the Nigerian Naira. The ongoing volatility and constrained
liquidity in the Nigerian foreign exchange market have resulted in increased
raw material input costs, which cannot be fully recovered in pricing due to the
competitive environment. The volatility is expected to remain for the balance
of the year, due to the collapse of the crude oil price and the political
uncertainty relating to the general election.
A further devaluation of the Naira will impact negatively on the outlook of the
DFM business for the balance of the year, although it is expected that market
pricing will adjust in time once stability is restored to the local currency
market. The short term prospects for the Nigerian businesses remain
extremely challenging notwithstanding the positive operational momentum that
the DFM business is starting to achieve. Tiger Brands continues to remain
focussed on the long term prospects of this business.
The company’s current share price levels will negatively impact on the group’s
IFRS 2 share option charge compared to the previous year.
The outlook for the year remains challenging, especially for the Nigerian
businesses. In the domestic market, the cost saving initiatives implemented
over the last few years continue to bear fruit and have, to an extent, mitigated
the ongoing cost pressures resulting from the weaker Rand. The absolute
focus on the strength of our brands remains paramount and the company will
continue to optimise this through careful price management, increased
marketing support and new product innovation.
Bryanston
9 February 2015
Sponsor:
J.P. Morgan Equities South Africa Proprietary Limited
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