Tiger Brands revises its profit warning
The group said on Friday headline earnings per share would fall by between 25% and 30%
Tiger Brands, which is recovering from a food contamination scandal, said on Friday its profit decline in the year to end-September would not be as severe as it previously warned.
Headline earnings per share would fall by 25%-30%, a revision from the 22%-37% range it had previously forecast. The announcement lifted the company’s shares 0.3% higher to a close of R280.86.
The stock has slipped about 40% since reaching highs of more than R470 in late January, months before it said a large-scale recall of cold meat products, linked to a deadly outbreak of listeria, had cost it as much as R365m.
Tiger Brands reopened its Enterprise meat canning operation in September and its value-added meat facility in Germiston in October.
Besides the recall and suspension of these operations, the group in August warned profits would fall due to the “challenging consumer and competitive environment” which had dented volumes and prices.
It was also grappling with significant cost increases because of the rand, fuel price increases, labour settlements and higher administered costs, which had yet to be recovered in selling price increases. Tiger Brands also warned about potential further impairments of intangible assets in its personal-care business.
JP Morgan said in a research note in October that it had cut its medium-term earnings forecasts for Tiger Brands.
Its price target for the company to September 2019 was also lowered to R321, though the US bank maintained its “overweight” recommendation for the stock.
“As value-added meat products operations stabilise over the course of financial year 2019, we expect management focus to be redirected back on to the core group businesses and delivery of strategic initiatives which were showing early signs of bearing fruit,” JP Morgan said.
Operating margins were likely to improve and the group would likely benefit from “various self-help opportunities”.