Listeriosis leaves Tiger Brands listless
By Michelle Gumede - Apr 4th 2018, 08:29
Tiger Brands’s share price has fallen 12.47% since the health ministry publicly announced that its factory in Polokwane was the source of the listeriosis outbreak on March 4.
Analysts have criticised the food producer’s handling of the crisis, which has seen it recall value-added meat products across the country and close down numerous factories.
The general view among several market watchers is that Tiger Brands should have been more transparent and proactive to protect consumers.
Tiger Brands has estimated that this would cost between R337m and R377m on a pretax basis before accounting for insurance recoveries. The company also faces a looming multimillion-rand class action.
"The company’s estimates are a lot lower than I anticipated. I expect the final loss amount to be in the region of R5bn," said Gryphon Asset Management portfolio manager Casparus Treurnicht. "The way management handled the case could drag the share down further."
Peter Takaendesa, portfolio manager at Mergence Investment Managers, said Tiger Brands had recently estimated the cost of the key issues related to its listeriosis exposure at R1bn "but this is just an estimate for now and the cost could go up or down dependent on how long the Enterprise facilities remain closed and how the class action cases are resolved".
The share price dropped 7.44% on the news and took a further 7.9% hit on March 7 as more information on the listeriosis outbreak emerged.
"The shares have come off materially due to weaker operational results and the listeriosis crisis but there are still many questions to be answered on the listeriosis crisis as well as Tiger Brands’s competitive position in some of its key product categories," said Takaendesa.
Consumers have taken a rather safe than sorry approach and scaled back on Tiger Brands goods. Shareholders have also been agitated by the growing list of scandals that Tiger Brands has been involved in over the past few years.
Treurnicht said that some investors had for ethical reasons scaled back on Tiger shares.
With so many unknowns at this point, it was difficult to quantify the amount the scandal would ultimately cost the company, he said.
However, close competitor RCL Foods has dodged a bullet, "through proactive management" of the listeriosis scare, said Treurnicht.
RCL shares were up 1.69% in March, having climbed 18.42% so far in 2018.
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