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Tiger Brands profits slow in weak economy

Shares fall on the news.

Tiger Brands, South Africa’s biggest consumer foods maker, reported a sharp slow-down in profit growth on Monday and warned that competition would intensify as customers in its home market cut spending in a lacklustre economy.

Its shares fell on the news, sinking more than 3% in early trading, before regaining some ground.

“We see a very muted outlook,” said Chief Executive Lawrence MacDougall in a call to reporters. “The macro environment has been the biggest impediment” to performance, he added.

Tiger Brands reported a 1.6% rise in headline earnings per share (EPS) to 2 161 cents for the year to end-September, compared with the 19% rise a year earlier.

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

The company would respond by increasing spending on marketing in 2018 to arrest the decline in some of its products in South Africa, Chief Financial Officer Noel Doyle told investors in a presentation.

The company, which makes bread, breakfast cereals and energy drinks, earlier this year said it would refocus on its home market and on branded food products after heavy losses in Nigeria.

But Africa’s most advanced economy stalled in recent years amid weak business and consumer sentiment and the government has halved its economic growth forecast to 0.7% for this year.

Revenue for the year to end-September rose 2% to R31.3 billion, but sales volumes in South Africa declined.

The food maker, which also sells cosmetics and cleaning products, expects the battle for market share in South Africa to heat up in 2018 and to see “a lot of price-based competition” as consumers check spending in a weak economy, Doyle said.

Shares in Tiger Brands fell more than 3% after the release of the results, but narrowed losses to 0.8% at R399.50 by 11:28 GMT.

“The outlook statement wasn’t spectacular at all and I think this is giving investors reason to sell down the stock today,” said Gryphon Asset Management analyst Cassie Treurnicht.

After heavy losses, Tiger Brands in 2015 sold the bulk of its Nigerian business to Dangote Flour Mills and also pulled back from Ethiopia and Kenya.

Read: Tiger Brands: FY profit up; strong cash-flow generation

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