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Tiger Brands says interim profit could fall 36%

Shares fall over 7%. Hopes to sell its Value Added Meat Products business after March.

Leading food producer Tiger Brands warned on Wednesday that it expects half-year headline earnings to fall as much as 36% as its bakery and pasta business faced pricing pressure and a legal dispute wiped out exports to Nigeria.

The warning sent shares in the owner of brands such as Jungle Oats and Tastic rice tumbling nearly 8% to their lowest in more than eight years.

The challenging conditions have meant a tough start for new CEO Noel Doyle, the former finance director who replaced Lawrence MacDougall on his retirement last month.

Read: Did Tiger CEO retire or was he pushed?

Tiger Brands, which is due to report half-year results on May 25, said it expected headline earnings per share from continuing operations of 497-552 South African cents for the six months ending March 31, 2020, down from 773 cents reported a year earlier.

The company said the figures reflect ongoing challenges within the grains portfolio, particularly affecting bakeries, pasta and rice brands. Last year reported it that it was facing pricing pressures in bakery, supply challenges in instant noodles and other issues.

Tiger Brands also said on Wednesday that its export division was significantly affected by a legal dispute with a former distributor in Nigeria, resulting in virtually no sales into that country. The negative performance was further exacerbated by ongoing foreign exchange liquidity issues in other export markets, it said.

Tiger Brands said it expects difficult trading conditions to continue in the second quarter of its financial year (January-March), as volume and pricing pressures within grains persist, whilst indications are that the quarter will be challenging for groceries.

Exports will continue to be affected by the legal dispute in Nigeria, it said.

At 11:26, Tiger Brand shares were down 7.78% at R184.23, a level last seen in September 2011.

The firm also said a formal due diligence process has started in respect of certain bidders for its Value Added Meat Products (VAMP) business and it hopes to sell the business after March.

“Good progress has been made in this regard, however, several issues are subject to clarification and discussion between the various parties and, as such, no definitive agreements have been concluded at this stage,” it said.

Tiger Brands is exploring the sale of the VAMP business after a review last year concluded it was “not an ideal fit” in its portfolio.

That business was linked to a 2018 listeriosis outbreak, which killed more than 200 people in South Africa and was traced back to a factory operated by Tiger Brands-owned Enterprise Foods.

The outbreak forced Tiger Brands to recall cold meat products such as polony and suspend operations at its facilities, which have since reopened.

The company also faces a class action lawsuit over its role in the outbreak.

“The parties are continuing with pre-trial preparation, whilst subpoenas have been issued for the disclosure of information by third parties, which is pertinent to the outbreak. Some of the third parties have declined to disclose the information in their possession,” it said.

South Africa‘s High Court will hear various applications on May 13 to 15 May to either enforce or set aside the subpoenas, it added.

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More bad corporate news.
Boot coming for many employees…
terrible

The entire JSE Food Producers Sector is a disaster zone. Administered costs like rates and taxes, combined with the unavailability of unaffordable electricity and water shortages on one hand, and the implosion of consumer spending due to the same factors, on the other hand, is squeezing the profitability out of these companies.

In short – The ANC is killing the food producers. Who will produce food then? Luthuli House?

End of comments.

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