Major overhaul on the cards for Tiger Brands
IOL Business - May 25th 2016, 15:53
Johannesburg - South Africa's biggest consumer foods maker, Tiger Brands, pledged a sweeping overhaul of its operations on Tuesday, after a botched investment in Nigeria and mounting difficulties in its home and exports markets force a re-think.
New chief executive Lawrence MacDougall, who is just two weeks into the job, faces shrinking demand in African export markets such as Nigeria and Mozambique, and a bleak outlook in South Africa, Tiger Brands' largest market, where consumer confidence is near 14-year lows.
“Being able to focus our attention and being able to prioritise where we spend our money is going to be critical to a good set of results,” MacDougall said.
“We need to know which buttons to push and which to prioritise,” he told reporters after an interim results presentation for the company, which makes bread, breakfast cereals and energy drinks.
Tiger Brands warned that tough trading conditions would persist for the rest of the year, echoing its smaller rival Pioneer Food Group, which said on Monday a severe drought and rising interest rates were heightening concerns over South Africa's economic outlook.
Inflation in South Africa is expected to average 6.7 percent in 2016, the central bank said last week, while low growth is set to persist.
It was partly to offset slow growth at home that Tiger Brands paid nearly $200 million for a 65.7 percent stake in Nigeria's Dangote Flour Mills in 2012. But it failed to stem losses at the venture and sold it for just $1 in December last year.
Nigeria's economy has been hit hard by the oil price slump and currency shortages.
Chief operating officer Noel Doyle told Reuters the company would tread more cautiously in uncharted markets and currency and inflation concerns could dampen the appeal of any acquisitions in the near future.
“If we brought a big acquisition today to the market in Africa shareholders would quite rightly have a lot of questions about it and there would be some resistance,” he said.
Currency devaluations in export African markets such as Nigeria and Mozambique have hit demand and threaten to permanently hurt operations.
Operational challenges in Tiger Brand's Deli Foods - its last remaining business in Nigeria - and in Mozambique have also prompted the firm to buckle down and focus on fixing problems rather than growing its footprint.
“They need to tighten up and do a thorough review so that they don't make the same kind of mistake they made with Nigeria in future,” Absa Wealth investment analyst Chris Gilmour said.
Tiger Brands posted total sales up 9 percent to R15.9 billion and declared an interim dividend of 363 cents per share. They reported flat headline earnings per share (EPS) of 978 cents on continuing operations but a 14 percent rise in headline earnings per share (EPS) to 974.6 cents on continuing and discontinued operations.
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