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Tiger Brands will extend until next May the operations of its fruit canning factory in the Cape Winelands as it considers purchase offers for the business, throwing a lifeline to as many as 4,000 workers and dozens of farmers in the area.
The decision, announced on Tuesday, comes more than a month after Tiger Brands, a R27bn food manufacturing giant, said it had stopped looking for a buyer for the business and talks with labour about shutting it were due to end in August.
It said the decision to keep operations going until next May was taken after a compact was agreed on with labour, employees of Langeberg & Ashton Foods, and the Canning Fruit Producers Association to facilitate the talks between itself and potential buyers. It did not name the potential buyers.
Noting that the conclusion of any transaction would not take place in time for a successful buyer to put preparations in place to process the forthcoming season’s crop, it opted to take the risk of operating the business for the season ahead.
“The terms agreed upon will contribute to significantly mitigating the risk of operating losses in the forthcoming season,” Tiger Brands said, cautioning about the effect of weather conditions, foreign exchange rates and global pricing dynamics on the processing and marketing of deciduous fruit.
The temporary reprieve for loss-making Langeberg & Ashton Foods could save the life of the specialised factory and the 250 permanent and 4,300 seasonal jobs that are on the line. The factory is one of only two fruit canners in SA and is the largest employer in the Langeberg municipality. Its closure would hit dozens of orchards that were planted for canning in Little Karoo, Ashton, Robertson, Bonnievale, Breërivier, Wolseley and Ceres.
The lifeline for the plant comes as a consortium of 160 farmers struggles to put together what agricultural industry group AgriSA has said is R200m-R300m in funds to take it off Tiger Brands’ hands.
Tiger CEO Noel Doyle said he was optimistic that “the flexibility, open-mindedness and good faith shown by all parties in reaching this compact will allow for the rigorous exploration of any new proposals in respect of the company’s deciduous fruit processing operations”.
Ebrahim Patel, the trade, industry & competition minister, who set up a high-level team of officials to consider alternatives to the closure of the factory, welcomed the news, saying more work would need to be done to tackle the challenges identified during discussions.
The decision to sell the plant — which has been in operation for more than 70 years supplying fruit for the Koo brand as well as international brands such as Silverleaf and GoldReef — followed a strategic review to better align Tiger’s portfolio and to focus on manufacturing, marketing and distributing everyday food and beverages.
Affected by surging steel and aluminium prices, power cuts and port inefficiencies, SA’s canning industry has been hard hit on several fronts.
There was a brief upswing in demand for canned fruit at the start of the Covid pandemic, when people were stocking their pantries, but that has since fallen as cash-strapped and health-conscious consumers opt for cheaper fresh fruit.
Tiger Brands said the extension of operations on a mutually beneficial basis will allow for a possible transaction that may result in a long-term, sustainable solution for the deciduous fruit processing business.
The food producer’s latest half-year earnings report shows the business made about R700m in sales but none of that flowed to the bottom line, with losses widening to R54m from R52m in the six months to the end of March.
The Langeberg & Ashton division produces canned peaches, pears, apricots, apples and guavas as well as fruit purées largely for the export market (about 85%).
The factory supplies Tiger Brands with canned fruit under the Koo brand; pulps for All Gold and Hugo’s jam; Koo baked beans; and purées for Purity baby foods.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.