Tiger Brands under pressure as shares fall 9%
Fast moving consumer goods group says meaningful recovery depends on an improvement in the consumer environment
Shares in Tiger Brands plunged 9% on Wednesday morning after the consumer goods group said sales fell in the four months to January because of pricing pressures and volume declines.
Analysts said the weak trading update indicated that consumers were under intense pressure. Tax hikes could make consumers worse off.
Tiger Brands said revenue fell 5% compared to a year before, with selling prices down 1% and volumes 4% lower owing to declines in the home and personal care categories and in exports. “Trading during the first four months of the financial year was characterised by intense competition in a low-growth, value-driven consumer environment,” the owner of Tastic, Oros and Koo said.
Sales declines were “aggravated” by price deflation in soft commodities and higher levels of discounting in the South African business, stemming from competitive pressures.
“Home care’s performance was impacted primarily by lower demand due to a delayed pest season and an unfavourable product mix, while personal care was negatively affected by increased competition and overall market contraction.”
The deciduous fruit business was hurt by the stronger rand, while exports were negatively affected by “foreign currency liquidity issues, tight credit management and the relative strength of the rand”.
However, Tiger Brands said gross profit margins improved thanks to the stronger rand and lower raw material costs. The group’s performance for the rest of 2018 would likely be dented by the slow start to the year.
Meanwhile, Tiger Brands said its manufacturing sites in the drought-stricken Western Cape were unlikely to be disrupted “at this stage”, provided no restrictions were imposed on the use of borehole water.
In a separate statement the group said the 26.6% shareholders who voted against the remuneration policy at Tuesday’s annual general meeting could submit concerns by March 9.