Tiger Brands’ share price came close to a two-year high on Wednesday following an upbeat annual general meeting address, during which new chair Geraldine Fraser-Moleketi expressed optimism about the group’s prospects as it enters its second century.
The share price strength and Fraser-Moleketi’s optimism was underpinned by a solid trading update, revealing volume growth of 2.6% in the three months ended December 31, 2020. Both the share price and the chair’s optimism seem undented by the sharp deterioration in trading in January (although the share price has fallen on Thursday).
New lockdown restrictions hit sales and reduced the overall growth in group revenue from continuing operations for the four months to January 31, to 9.4%, driven mainly by price inflation.
Fraser-Moleketi described employees’ response to the Covid crisis as “phenomenal” and said that it helped to ensure that South Africans had a secure supply of food and groceries despite lockdown restrictions. The trading statement stated that while it was not immune to the tragic consequences of Covid-19, its robust health and safety protocols appear to have had a positive impact. “These (protocols) include the frequent screening of employees as well as the use of antigen testing across our sites. Although there were no major disruptions to business continuity, some businesses were impacted by inbound supply disruptions.”
Costs relating to preventative measures taken to deal with Covid-19 amounted to approximately R26 million for the four months to January 31, 2021. And it seems the Covid-19 challenge is far from over. “As a precautionary measure, contingency plans have been put in place to mitigate the potential disruption of our internal and external supply chains in the event of an anticipated third wave,” said the company.
During the four months, volume growth had been achieved across many parts of the business “with particularly strong performance in maize, oat-based breakfast offerings, rice, snacks & treats and beverages as well as home care, personal care and baby”. However volume challenges were experienced within bakeries, maize and sorghum-based breakfast offerings as well as groceries and deciduous fruit.
“Groceries’ volumes were affected by increased competitor activity, inbound supply chain disruptions and poor seasonal demand.”
Moving on from ‘mis-steps’
In her first chair’s address, Fraser-Moleketi referred to the group’s previous “mis-steps as an organisation” but made no specific mention of any of them. The biggest of the unmentioned “mis-steps” was undoubtedly the listeriosis crisis in financial 2018, when 209 people died after consuming meat products sourced at one of the group’s meat plants. Other “mis-steps” include being caught for price-fixing and, having to take huge write-downs on the value-destroying acquisition of Dangote mills.
The new chair told shareholders of the hopes that the food giant would play a “meaningful role in business and society” in the future.
Fraser-Moleketi, who joined the Tiger Brands’ board in September 2020 was appointed chair in mid-December, taking over from long-serving Khotso Mokhele who is no longer on the board. At last year’s AGM an unprecedented 31.4% of shareholders voted against Mokhele’s re-election.
Despite the group’s drama-filled recent history and the uncertainty caused by the Covid-19 pandemic not one question was raised by shareholders at Wednesday’s AGM.
The only indication of any shareholder action was the 30.6% vote against the re-appointment of non-executive director Maya Makanjee, who was appointed to the board in 2010 and is chairman of the social, ethics and transformation committee. In addition 24.32% of shareholders voted against the re-appointment of auditor Ernst & Young.