JOHANNESBURG, SOUTH AFRICA — Tiger Brands Limited reported on May 24 that after-tax profit for the six months ended March 31 increased 44% to R1.7 billion ($108.5 million).

Group turnover increased 9% to R15.9 billion. Earnings per share from continuing operations was unchanged at 978 cents. The company declared an interim dividend of R3.63 per share, up 7% from the prior year’s R3.39. 

The Grains division, which represents 39% of group turnover, saw operating income decline by 1% from R890 million to R881 million. Turnover in the division increased 10% to R6.2 billion. 

The Millbake wheat value chain posted unchanged earnings while there was a decline in the contribution from maize and sorghum. The period under review was characterized by significant inflation in raw material inputs and intense competition, which adversely impacted volumes and margins. Marketing investment increased by 36% to R173 million (2015: R127 million), driving visibility and brand awareness in an extremely competitive environment.

Overall volume within the Milling and Baking categories declined by 2%, driven primarily by maize and sorghum. However, turnover increased by 9% to R4.3 billion (2015: R3.9 billion), mainly due to the effects of inflation, while operating income declined by 4% to R710 million (2015: R736 million). 

Other Grains reflected solid growth, increasing total volumes by 4% and operating income by 11% to R171 million (2015: R154 million).

Overall, Tiger said soft commodity prices, particularly in maize and sorghum, were severely impacted by rand weakness and the effects of the drought in southern Africa. The balance of the group’s domestic businesses reflected a solid underlying performance, while the International segment benefited from the turnaround of Haco Tiger Brands (Haco) and a strong performance from the Deciduous Fruit (LAF) business. 

The group’s interest in Tiger Branded Consumer Goods Plc (TBCG), formerly Dangote Flour Mills Pls, was disposed of with effect from Feb. 25. Consequently, TBCG has been treated as a discontinued operation in these results, with the comparative information restated accordingly. 

The outlook for the balance of the year remains challenging, with downside risk to the macro-economic environment, both in South Africa and in a number of African markets, likely to add further pressure on consumers, Tiger said. This will be exacerbated by increased inflationary pressures in the second half, when the full impact of the rand‘s depreciation on the group’s domestic cost base will be felt. 

Against this background, the company said it remains focused on the quality and strength
of its brands and on its ability to deliver value to consumers in a cost-effective manner. The key challenge will be to maintain volume momentum notwithstanding price increases that are currently being taken to partly offset the cost pressures referred to above.