Tiger Brands still under pressure


Tiger Brands still under pressure

Published Date: 2020-02-13 | Source: Stephen Gunnion | Author: Stephen Gunnion

Tiger Brands still under pressure

The food group says it has made good progress with the disposal of its processed meats business as it prepares investors for lower earnings.

Tiger Brands has warned of a sharp decline in first-half earnings, sending its shares lower yesterday. However, it says it's making progress with the sale of its Value Added Meat Products (VAMP) business, which was linked to the listeriosis outbreak that left more than 200 dead two years ago.

After a tough first quarter, the fast-moving consumer goods group said difficult trading conditions continued into the second quarter of its financial year, with ongoing volume and pricing pressures within its Grains division and challenges for its Groceries unit. Exports were impacted by a legal dispute with a former distributor in Nigeria, which resulted in virtually no sales into that country. A court hearing on the matter was held at the end of January but was adjourned to mid-March to give them time to settle the matter amicably. The group also faced foreign exchange liquidity issues in other export markets.

First-quarter revenue was flat at R8.4 billion as selling price inflation of 4% offset an overall volumes decline of 4%. The lower volumes, coupled with the inability to fully recover input costs, impacted profitability. As a result, it said earnings per share (EPS) from total operations for the six months to end-March were likely to decline by at least 36% and headline EPS by between 30% and 37%. From continuing operations, it said EPS would be at least 35% lower and HEPS would fall 29% to 36%. If it reaches a deal to sell VAMP before the end of March, it will be accounted for as a discontinued operation and its earnings will be adjusted accordingly, it said. Last year's sale of some of its Oceana shares to Brimstone Investments, which resulted in an after-tax capital profit of R282 million, also inflated the comparable period's EPS.

Tiger said bidders for VAMP, which includes its Enterprise Foods and Renown brands, had started a formal due diligence process but a deal was unlikely to be reached before the end of March.

Tiger said the class action lawsuit against the company relating to the listeriosis outbreak was ongoing, with parties continuing their pre-trial preparation.

Its shares closed 5.6% lower at R188 yesterday.

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