No end in sight to Tiger Brands’s bad year
The company’s share price collapses as much as 10%, shedding about R6.2bn of its market capitalisation
Tiger Brands’ tough year, marked by a listeria outbreak that killed 180 people, looks set to get worse.
The company’s share price collapsed as much as 10% on Thursday, shedding about R6.2bn of its market capitalisation, after the group said full-year profit could drop by more than a third.
A deterioration in SA’s broader economy is adding to Tiger Brands’ woes, with the producer of Enterprise polony, Jungle Oats and Oros saying it expected to suffer from weak consumer confidence and higher costs as a result of the rand’s drop.
Chief financial officer Noel Doyle said on Thursday the listeriosis outbreak had stretched the company’s management. “It is the most serious crisis we have faced. It has taken a lot of our time. It would be incorrect to say otherwise.”
As a result of the outbreak, Tiger Brands had closed four factories, he said, while also keeping its employees.
Tiger Brands did not know when the factories would reopen, he said.
The share price closed 8.94% down at R298.33 a share, leaving its decline in 2018 at more than 35%. On Thursday, the company’s market capitalisation stood at R56.6bn.
Since March, when health minister Aaron Motsoaledi fingered Tiger Brands in the listeriosis outbreak, the company has recalled and destroyed a total of 4,000 tons of ready-to-eat chilled meat products at a cost of R415m.
The total cost of the outbreak could rise further as the company faces a class lawsuit.
Thami Malusi of Richard Spoor Attorneys said it was premature to confirm the amount of the claims.
“We have about 100 people in our database. The suffering of each of those people will have to be ascertained. It will take time,” he said.
Tiger Brands in April confirmed the presence of listeria strain in samples of finished ready-to-eat processed meat products from its Polokwane Enterprise Foods manufac- turing facility.
Doyle said the weak consumer confidence would add to the company’s plight.
“We have noticed that the South African consumer has become price conscious. For instance, in a category such as maize, there is preference for house brands.
“That level of price consciousness we are seeing is making it difficult for us to recover the cost increases that we are seeing in the market.
“It is a tough environment. Everyone is fighting for volumes,” he said.
Given the difficulties the group faced, the drop in the company’s share price was to be expected, Doyle said.
“A share price movement is based on two fundaments. The first one is the anticipation of cash flow. Secondly, there is sentiment. I think given the challenges we have faced and the slowdown in the economy, it is to be expected that there would be that drop.
“This year has been unprecedented. People can say Tiger Brands did not react fast enough. But our direct competitors have also had it tough,” Doyle said.
In its interim results, Tiger Brands said it expected to report on November 22 that its headline earnings per share (HEPS) for the year to end-September declined by between 22% and 37%. Its listeriosis woes had been compounded by higher fuel prices and other problems.
The recall had contributed to its interim HEPS declining 16% to R8.68.
With Robert Laing