Sales in the Grains division rose 13% in the first half.
JOHANNESBURG, SOUTH AFRICA — Tiger Brands Limited profit before tax during its first six months ended March 31 increased 4% to R2.3 billion ($178 million) due to a strong domestic performance that was partially diluted by tough trading conditions in Exports and International coupled with a decline in income from associates.

Total sales for the company was R16.4 billion a 7% increase compared to the same period last year.

The company’s Grains division saw more robust performance in the first half compared to other division within Tiger Brands. 

Tiger Brands_Noel Doyle_CFO
Noel Doyle, chief financial officer.
“We've definitely seen that the grains portfolio has been much more resilient at a category level through the cycle than, say, something like snacks and treats, even beverages, and the grocery categories,” Noel Doyle, chief financial officer (CFO), during a conference call with analysts on May 25. “The category dynamics have been much more positive. So, I think as we get the deflation in maize in the second half of the year, it will free up some consumer spend that we think may well benefit some of our other categories.”

Sales in the Grains division rose 13% to R6.909 billion, while operating income increased by 16% to R1 billion. 

Milling and Baking delivered 14% sales growth of R4.879 billion, supported by a 3% increase in volumes. Operating income rose by 12% to R792 million, driven primarily by the wheat-to-bread value chain benefiting from market share gains, improved execution and enhanced quality. Profitability in Maize, however, was negatively affected by higher raw material costs, which were not fully recovered in selling prices. 

Other Grains reflected strong growth, increasing turnover by 11% to R2 billion and operating income by 33% to R228 million. The stronger rand contributed positively to improved margins, the company said.

Tiger Brands
 Pieter Spies, grains executive.
In February, Pieter Spies began his role as the newly appointed grains executive. He has more than 25 years of experience in the agricultural industry. In the past, he has worked for Coca-Cola, Diageo and Brandhouse. Spies most recently worked for the GWK Group as its chief executive officer for the past three years.

The Exports division operating income decreased 25% to R194 million in the first six months, while sales were unchanged at R2.1 billion. The performance of the Exports division was negatively impacted by the lack of foreign exchange liquidity in many of the countries Tiger Brands exports to, the strict imposition of credit terms as well as an unfavorable product mix. 

“Exports and international, so that very strong performance in aggregate from the domestic business, was diluted somewhat by the exports and international business, and really, across the board it's been quite challenging,” Doyle said. “The dynamics of the local markets in terms of local consumer demand, local consumer confidence, have been impacted. We've also seen changes in terms of import permit regulations, particularly into Zimbabwe, and of course I'm sure everybody in the room is aware of the liquidity challenges that both Nigeria and Mozambique — and Zimbabwe, which are our three biggest markets, have experienced. So, it has been quite challenging.”

Tiger Brands completed thesale of its 51% stake of East African Tiger Brand Industries(EATBI) to its partner East Africa Group PLC (EAG), which currently owns a 49% stake of EATBI. The company also expects the sale of its 51% stake in Haco Tiger Brands Ltd., a Kenyan-based business, to be completed by the end of its financial year.

Tiger Brands said the outlook for the balance of the year is particularly challenging, with volumes in the domestic market having significantly slowed in the second quarter, while a recovery on the balance of the continent is not imminent. Having largely been successful in correcting margins and recovering exceptional cost push, Tiger Brands said its key challenge will be to manage market share and volume growth without compromising profitability. This will be driven by focused execution, targeted marketing investment to sustain the strength of the company's power brands and appropriate cost control measures, the company said.