JSE-listed Tiger Brands says major operational disruptions could see the company reporting 15% less profit from continuing operations for the six months to September 30, and cost it almost R700 million in once-off costs and stock losses.
The owner of popular household brands such as Jungle Oats, Koo, Albany and Oros says it expects its headline earning per share (Heps) for its continuing operations to be between 60 and 179 cents less than the 1 196 cents reported in the previous comparable period.
In July, the company was dealt some tough financial blows, as it was faced not only with counting the cost of the unrest seen in parts of KwaZulu-Natal and Gauteng, but also the recall of about 20 million Koo and Hugo canned vegetable products suspected of defective packaging.
According to a Sens trading update released by the company on Tuesday, the write-off of assets, coupled with stock losses experienced during the civil unrest, will cost the company about R100 million and the recall of the canned vegetable products will cost it R647 million.
“The after-tax impact of the stock losses, together with the impact of the recall, is estimated to be in the region of 318 cents per share,” the company said.
Despite this, the food producer says it anticipates Heps from total operations to rise by between 141 cents and 235 cents, more than the 940 cents reported in the previous period.
“The increase in Heps from total operations was primarily due to the losses recorded in Value Added Meat Products (VAMP) in FY2020 compared to a small profit in the year ended September 30, 2021,” the company stated.
Tiger Brands sold VAMP, its processed meats division, to Molare (Pty) Limited and Silver Blade Abattoir for a total of R428 million in 2020. The sale came after the division was implicated in the listeriosis outbreak that gripped the country in 2017, killing over 200 people.
“These once-off costs more than offset the group’s improved underlying performance, despite a particularly challenging second half for the Milling and Baking operations as well as Exports,” Tiger Brands said.
“The write-off of stock related to the civil unrest as well as the recall will be accounted for through cost of sales. Refunds related to the recall will be accounted for as a reduction in revenue, whilst other recall related costs will be accounted for through the relevant expense functions on the income statement,” the company added.
Tiger Brands is set to release its full-year results on November 19. Its share price closed almost a percent lower on Tuesday, at R187 a share.