Tiger Brands revenue falls short after challenges at meat unit
* Reopening of meat factory posed challenges
* Domestic sales rose but exports weakened
* Consumer income under pressure in South Africa
(Adds CFO quotes, recasts lead)
By Nqobile Dludla
JOHANNESBURG, May 22 (Reuters) - South Africa's Tiger Brands
underestimated the work involved in re-establishing its
processed meats business after a listeria outbreak, it said on
Wednesday, leaving it with disappointing sales and a battle to
reclaim market share.
The outbreak in February 2018 forced the country's leading
food producer to recall cold meat products such as polony and
suspend operations at its facilities. Its shares now trade
around 42% lower than before the first announcement regarding
Performance at the Value Added Meat Products (VAMP) division
was hit by the challenges of re-opening the factory and
relaunching products. Revenue in the six-months to end March
tumbled by 79 percent and the unit posted an operating loss of
296 million rand.
The operational challenges hit Tiger Brands harder than it
expected, Chief Executive Lawrence Mac Dougall said at the
results presentation alongside Chief Financial Officer Noel
Doyle, who added they underestimated the complexities of
re-opening a plant that had not operated for nine-months.
Doyle said the facilities were re-opened slightly later than
anticipated and the group ended up losing some of its key
customers during the important Christmas trade.
"For the most part, the internal supply chain management
issues have been resolved and we are now in position to satisfy
market demand," Doyle said.
"The real challenge for us is that having been out of the
market... we got to now climb the mountain and reclaim market
The operating loss in VAMP, alongside lower sales in
international markets resulted in the owner of Jungle Oats and
Tastic rice reporting a 2% fall in group revenue to 15.4 billion
rand ($1.07 billion), compared with analysts' expectations of
15.7 billion rand in a Refinitiv poll.
Excluding the VAMP division, revenue was up 4%.
Revenue from exports and international markets fell by 11%
due to the change in a Nigerian distributor, challenging market
conditions in Mozambique, exacerbated by two cyclones and price
deflation in international markets.
Domestic revenue excluding VAMP was 6% higher, driven by
volume growth and inflation at 4%.
South African retailers and food producers are struggling to
lift sales growth to double digits as consumers are dealing with
a value-added tax hike, record fuel increases and rising utility
costs, which have all intensified pressure on consumers'
The food producer said all categories, except sorghum-based
products, maize, pasta and Baby Care recorded selling price
inflation, however the increases were not sufficient "to fully
recover cost increases, resulting in negative operating
Tiger Brands and its peers are grappling with an industry
that has become more competitive as manufacturers are forced to
dip into their margins to maintain volumes and market share.
Headline earnings per share (HEPS) from continuing
operations in the period dropped by 12% to 762 cents from 868
cents a year earlier.
Tiger Brands declared an interim dividend of 321 cents per
share for the first half to March, down 15% due to lower
earnings. Shareholders will also get a special dividend of 306
cents per share from once-off proceeds received from the Oceana
Group Ltd stake sale to Brimstone.
($1 = 14.3600 rand)
(Reporting by Nqobile Dludla; Editing by Subhranshu Sahu and
First Published: 2019-05-22 08:55:05
Updated 2019-05-22 14:47:52
© 2019 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.