Picture: SUNDAY TIMES/ALAISTER RUSSELL
Picture: SUNDAY TIMES/ALAISTER RUSSELL

SA’s deadly outbreak of listeriosis in the first half of the year cut Tiger Brands’ after-tax profit by more than a tenth, says CEO Lawrence MacDougall.

The outbreak, which has so far killed nearly 200 people, cost the company, one of Africa’s largest food producers, R365m. This is equivalent to 15% of headline earnings per share in the six months ended March 2018. The outbreak will cost another R50m per month.

Tiger reported a 4% drop in revenue to R15.7bn on pricing competition and lower overall volumes of 1.6%.

It’s “not a performance that we are proud of”, MacDougall said on Thursday. “Pricing has been fierce in the market. But the impact [of the listeriosis outbreak] has been very small on other Tiger Brand brands.

“The company has so far found no reason to believe that we were not complying” with safety standards, he said. The company will “honestly and openly” resolve the “national crisis” related primarily to its Enterprise factory in Polokwane, and food safety.

The share slumped 4.12% on Thursday, the biggest drop in more than two months, leaving it with a market capitalisation of R66.3bn. The food producer is incinerating 4,000 tonnes of product in relation to the listeriosis outbreak, a task that could take three months.

Insurance claims and other potential legal consequences for the group have not yet been quantified, MacDougall said. Rehabilitation work continued at shuttered facilities in Polokwane, Germiston and Pretoria.

The group is deep-cleaning the plants and training staff, having withdrawn some ready-to-eat and ready-to-cook products. It is also working with regulators on new industry standards and is not sure when the closed factories will reopen.

“All avenues have come out blind and we have not found the root cause yet,” MacDougall said. “We are doing this in a very, very responsible way for the future longevity of the brand.”

Meanwhile, the firm said it was still awaiting “clear guidelines” from the health department over the outbreak.

While the company was “within” the relevant national standards for processed meat products, “industry standards are not adequate”, Cratos Capital portfolio manager Ron Klipin, said on Thursday.

“One questions the way the listeriosis situation was dealt with. This puts the CEO in a difficult position,” he said.

Klipin said a positive aspect of the result was that gross profit margins were up 80 basis points at 33%. But operating margins were down 60 basis points to 13% due to “difficult market conditions”. He said the first half was “disappointing”.

Tiger said the outlook for the rest of the year was challenging. Operating income slipped 8% to R2bn in the period, but the core domestic food businesses delivered “a steady performance”.

Tiger Brands’ interim dividend remained unchanged at 378c per share.

allixm@businesslive.co.za

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