As headwinds persist in South Africa’s economy, foodstuffs manufacturer Tiger Brands is reshaping its portfolio as it explores opportunities in categories with higher margin potential, dropping problematic product ranges and expanding its presence in the informal sector.
Tiger Brands chief executive officer Tjaart Kruger on Friday said the JSE-listed company, which also has regional associates, was “reshaping to a desired portfolio” geared for the future. Shares in the company traded 1.2% weaker at R180.7 in Friday’s trade session on the JSE.
“We are looking to deliver some changes to our current portfolio, by exploring identified opportunities for entry in adjacent categories – where we see valuable synergies, a growing market, and/or higher margin potential – as well as exiting certain categories and product ranges that are no longer deemed future-fit,” he said.
This would also include “turbo-charging our growth in general trade” as a strategy aimed at capturing “the growth opportunities evident in the informal [sector]”. Tiger Brands was thus expanding its presence in the informal segment of the market “by implementing robust route-to-market support and solutions”.
In the year to end September, Tiger Brands raised revenues by 10% to R37.4 billion, although operating income was 9% at R3.1bn.
The increase was driven by price inflation of 11%, favourable foreign exchange gains of 1% and marginal overall volume declines of 2%.
“Volume growth in exports was offset by volume declines in the domestic business, primarily attributable to milling and baking, groceries and baby, as well as the deciduous fruit business, which suffered from the timing of shipments.
These declines were partially offset by volume growth in rice, beverages, home and personal care and Tiger Brands food service solutions, as well as Chococam.
Although earnings per share fell 2% to 1 725 cents, headline earnings per share increased by 2% to 1 735 cents, helping it declare a final dividend of 671 cents which is up 3%.
The mismatch in performance of earnings per share and headline earnings per share (HEPS) was “due to the non-recurrence of certain capital profit items accounted for in earnings” for the previous year, “which were excluded” from headline earnings per share.
The company described its performance for the period under review as a reflection “of the challenging trading environment marked by high food inflation, cost-conscious consumers continuing to trade out of premium products, rand depreciation, and unreliable electricity supply” from Eskom.
In light of this, the company had to factor in cost containment initiatives and streamline supply chain efficiencies.
However, ongoing challenges of fully recovering higher input costs persisted in the second half, resulting in the overall gross margin declining to 27.7% from the 30.3% reported in the prior year.
Consequently, group operating income was impacted by non-recurring items related to insurance proceeds of R137 million and retrenchment costs of R95 million, resulting in a decline of 9% to R3.1 billion.
Income in Tiger Brands from local and regional associates increased by 46% to R697 million, driven by a good underlying performance from Carozzi.
On Friday, Tiger Brands appointed Thushen Govender as new chief financial officer, replacing Deepa Sita, who resigned from the company.
Last month, Tiger Brand's announced that chief executive officer Noel Doyle was stepping down, with Kruger announced as successor.
Doyle would remain available to Tiger Brands until March 31, 2024, to facilitate a smooth handover.