South African Food Producer Tiger Brands Warns Of Interim Profit Fall
South Africa's 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.
Tiger Brands, which is due to report half-year results on 25 May, said it expected headline earnings per share from continuing operations of 497-552 South African cents for the six months ending 31 March 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.
Exploring Sale Of The VAMP Business
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.
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.
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.