BRYANSTON, SOUTH AFRICA — Tiger Brands Limited reported on Feb. 9 that sales for the first quarter ended Dec. 31, 2014, were up 7%, a decrease from the 10% growth seen in the same period a year earlier.

Sales for the quarter were 8.2 billion rand ($707.83 million). The company attributed the slowdown to weak demand and poor performance of Dangote Flour Mills in Nigeria. 

Volumes in the domestic businesses have moderated as the cumulative effect of price increases taken over the past year to recover input cost pressures has impacted on consumer offtake, the company said. These input cost pressures have been exacerbated by the depreciation of the Rand.         

Dangote Flour Mills (DFM) has achieved positive volume momentum and operating leverage due to tight cost control and improved efficiencies in line with its stated recovery plan. Its results, however, have been negatively affected by foreign exchange losses on its foreign currency borrowings following the recent devaluation of the Nigerian Naira.

The ongoing volatility and constrained liquidity in the Nigerian foreign exchange market have resulted in increased raw material input costs, which cannot be fully recovered in pricing due to the competitive environment. The volatility is expected to remain for the balance of the year, due to the collapse of the crude oil price and the political uncertainty relating to the general election.

Dangote reported a widened loss of 176 million Rand ($14.86 million) for its first quarter ended December, according to news reports from Feb. 3. Dangote, which is 65.7% held by Tiger, said its total comprehensive loss widened 4.1% as the Nigeria-listed company included a currency devaluation charge of 1.29-billion naira.

A further devaluation of the naira will impact negatively on the outlook of the DFM business for the balance of the year, although it is expected that market pricing will adjust in time once stability is restored to the local currency market, Tiger said. The short term prospects for the Nigerian businesses remain extremely challenging notwithstanding the positive operational momentum that the DFM business is starting to achieve. Tiger Brands said it continues to remain focused on the long term prospects of this business.