Nicola Mawson
Tiger Brands’ shares shot up nearly 5% yesterday as it reported full-year results that, as CEO Tjaart Kruger said, “restored the roar” to the company after it reported revenue up 1% to R37.4 billion, headline earnings per share of R1.81 and a final dividend payout of R1.034 for the year to September.
The share traded at a high of R263.99 and by 4.30pm was trading at R261.
The company, the home to Albany, Koo, Tastic, All Gold and Purity brands, has been working on becoming agile and decentralised and has, as a result, trimmed its business units from five to six.
Speaking with Business Report, Kruger said, “What we set out doing a year ago is we said we must make Tiger a productive, low-cost produce of food.”
He explained that this involved a change in operating model to one that can analyse situations, come to conclusions, make decisions and execute them quickly and efficiently. “We weren’t there. We had lots of people that just spun around for ever and ever around Teams meetings and spreadsheets. So, we changed the operating model.”
This, said Kruger, had the effect of reducing costs, and it will continue to take out costs for “the next year or three, and then we must stay efficient”. Tiger Brands spent R970 million on key projects such as the Aerosol Home and Personal Care line, the commissioning and move of the peanut butter facility as well as a Jungle investment for flakes innovation. This was somewhat lower than the R1.2bn spend in the prior year.
Yet, it faced competition in several units. In its milling and baking unit revenue declined 10% as initiatives to boost bakeries growth in the second half of the year were offset by “aggressive competitor pricing within the retail channel” from major competitors Sasko and Premier.
Culinary revenue increased by 5% to R8.9bn, with the domestic price inflation of 8% offset by lower volumes of 3%. Tiger implemented promotional strategies through combo deals across the group and focused marketing investment.
The grains revenue increase of 2% was enabled by strong promotional support in the second half, which focused on the carbohydrates share of the plate across all channels. However, volumes declined across all categories except pasta.
Snacks, treats and beverages gained 9% in revenue, with price inflation of more than 9% slightly offset by volume declines of 0.1%, while overall revenue in home, personal care & baby gained 2%, with operating income gains of 2% driven mostly by exports.
Tiger Brands noted that, in line with its strategy to optimise its portfolio, the sale of its baby wellbeing business, which was announced last month, marked “another milestone in the simplification of our portfolio”.
The group has also appointed advisors for the sales of its Ace maize and King Food brand, which makes sorghum porridge and beer, with the process expected to be concluded by the first half of 2025, Reuters reported.
We believe that the Tiger is now out of the kitchen and getting ready for the jungle - analyst
The listeriosis cloud continues to hang over Tiger Brands. Its results booklet stated that the matter, which has yet to go to court, is still in the discovery stage, with the National Institute for Communicable Diseases having only recently released all the files pertaining to the case.
Between 2017 and 2018, South Africa was hit outbreak of listeriosis that may have resulted from meat products produced by its Enterprise Foods entity. Lawyers from both sides are in talks to agree on relief for those with urgent medical issues.
“We are insured, and we think that’s adequate,” said Kruger when asked about the contingent liability, although its results booklet stated that the insurance will not cover punitive damages.
Shaun Chauke, a senior equity research analyst at Nedbank Commercial Banking, said, “Tiger Brands is simply on a winning streak: an overall good set of results with the business gaining momentum on its strategy. We believe that the Tiger is now out of the kitchen and getting ready for the jungle given that some of its wounds have recovered while in the kitchen.”
BUSINESS REPORT