JOHANNESBURG, SOUTH AFRICA — Tiger Brands Limited announced on Nov. 19 that profit for the year ended Sept. 30 was 942,000,000 rand ($67,228,447), down 51% compared to 1,904,800,000 rand ($135,885,083) during the same period of last year.
Sales for the year were 31,557,600,000 rand ($2,247,100,660), up 5% from 30,072,000,000 rand ($2,142,070,272) the same period of last year.
The operating income before abnormal items increased 3% from 3,556,000,000 rand ($253,703,698) to 3,653,700,000 rand ($260,689,058) in the same period of last year.
The Grains division’s operating income before abnormal items was 2,060,800,000 rand ($144,110,376), up 7% from 1,918,900,000 rand ($136,823,577) in the same period of last year. Bakeries reported an increase in operating income despite significant competition.
Volumes declined in the first half but growth resumed in the second half following a deliberate and measured response to competition, focused on product quality and the functional attributes of the Albany brand. This was supported by tactical pricing initiatives which proved successful, with Albany regaining its market leadership in the bread category during the fourth quarter of the year.
The Wheat Milling business delivered another solid performance, growing operating income and volumes at improved margins. While there was a decline in international wheat prices during the year, this was largely offset by an increase in the local wheat tariffs.
South Africa experienced drought in many of its maize producing regions during the growing season and this resulted in a significant increase in maize prices during the year, Tiger Brands said. Nevertheless, the Maize Milling business reported strong growth in revenue and operating income, driven by a focus on product quality, brand investment and careful price point management. An excellent performance was achieved in the Rice and Pasta categories, which delivered market share growth and double digit increases in operating income, the company said.
The Grains segment sales were up 4% from 10,948,600,000 rand ($775,557,037) to 11,375,400,000 rand ($775,557,037.72) during the same time as last year. Within the grains segment Milling and Baking sales earned 8,160,500,000 rand ($578,144,335), up 1% from 8,043,000,000 rand ($569,671,132). Other Grains had the largest sale increase of 11% from 2,905,600,000 rand ($205,735,657) to 3,214,900,000 rand ($227,700,108).
The group performed well given the challenging local and international operating environment, Tiger Brands said.
“Local demand continued to be constrained while competition intensified,” Peter Matlare chief executive officer (CEO) said. “Turnover was attributable to domestic operations increased by a healthy 6%. International operations came under heavier pressure, ignited by broader macroeconomic forces beyond the control of management.”
The group’s Nigerian operations, Tiger Branded Consumer Goods Plc (TBCG) — formerly Dangote Flour Mills Plc, were particularly hard hit. Following a sharp drop in the price of crude oil, which is Nigeria’s main export commodity, the naira was devalued and the concomitant impact on the Nigerian macroeconomic environment was widespread. The Nigerian operations reported a loss of 438,000,000 rand ($31,099,402) compared to a 281,000,000 rand ($19,956,396) loss in the same period of last year.
This, together with continuing losses at TBCG, led to the board of Tiger Brands to initiate a strategic review of its Nigerian operations.
Tiger Brands holds a 65.7% stake in TBCG.
After considerable and lengthy deliberations and consultation, and having explored several options, the board made the decision not to advance any further funding to TBCG and to impair its investment. In addition, it was also necessary to further impair its investments in Deli Foods. The financial impact of these impairments amount to 1.9 billion rand in the current year. Tiger Brands is currently exploring various alternatives with respect to its shareholding in TBCG. Tiger Brands, together with the board of TBCG will endeavor to find a suitable solution for TBCG’s operations going forward.
However, Matlare is optimistic about the future of the group on the African continent.
“The group’s strategic focus in recent years has been to profitably defend and grow its market share, while expanding on the rest of the continent,” Matlare said.
“People lie at the center of the group’s performance, and we remain committed to developing talent along the depth and breadth of the organization to build on existing strengths,” he said. “Tiger Brands continues to outperform its peers according to industry surveys on staff performance.”
Another source of strength for Tiger Brands is its iconic brands, the company said.
“We will continue to invest in innovative marketing initiatives to maintain the leadership position
enjoyed by many of our household brands.”
In the current year, investment in marketing has increased by 12%, while the rate of innovation has also improved marginally to 3.5% from 3.3%.
The drive to realize more efficiency from manufacturing is set to continue, while innovation continues to be encouraged. The previous financial year saw some 882,000,000 rand ($62,880,322) committed towards this goal and to provide for expanded capacity.
Matlare said supply chain management has also been streamlined in order to attain greater levels of efficiency.
“Accordingly, the group is on track to fully realize 500,000,000 rand ($35,674,548) of cost savings from changes to its manufacturing architecture and the centralization of procurement, finance and various administrative functions,” said Matlare.
Overall, Matlare believes that while the outlook for the year-ahead remains challenging, Tiger
Brands has the people, the brands and the organizational competence to meet these challenges head-on and ultimately continue on a sustainable growth path for the future.
Matlare will step down at the end of this year and a successor will be announced in due course.
Noel Doyle will step in as acting CEO from Jan. 1 2016.