Tiger Brands reports lower sales in wake of the listeriosis crisis
Revenue from the group’s processed meats business plunged 79% to R213m
Tiger Brands, which was named as the culprit in the 2018 listeriosis outbreak, says sales in the six months to end-March edged lower because of a slump in processed-meat sales and weak revenues from outside SA.
The food producer’s shares have lost about 42% of their value since it was blamed for the deadly listeriosis outbreak in March 2018. The group now faces a class-action lawsuit, which it plans to defend against.
Tiger Brands said on Wednesday that revenue from continuing operations fell 2% to R15.4bn in the half-year to end-March.
The value-added meats business, which had to shut factories following the listeriosis outbreak, faced difficulties with its relaunch, “which affected service levels”, the group said. Revenue from that division plunged 79% to R213m, and the unit made an operating loss of R296m.
PODCAST: Behind the class action lawsuits against Tiger Brands
Group CFO Noel Doyle said the value-added meats business would not reach break-even by the end of the year to end-September.
Tiger Brands said total net profit in the first six months was 1% down at R1.4bn, while headline earnings fell 11% to R1.3bn.
“The trading environment remained difficult, with continued pressure on consumer spending, resulting in sales volume increases in the domestic business while low price inflation impacted margins,” the group said.
Revenues from exports and international operations fell 11% to R1.7bn because of lower export volumes and price deflation in international markets.
Tiger Brands said it wrote off goodwill of R100m in beverages and seasoning business Davita. “This arose as a result of the consistent risks associated with key export markets, with lower sales projected for Nigeria and Mozambique, as well as lower sales forecast for the powdered seasoning brand, Benny.”
Tiger Brands said in a separate statement that its earnings per share for the full year to end-September will rise by more than 20% thanks to the unbundling of its stake in Oceana Group.
The unbundling yielded an unrealised fair-value gain of R1.6bn, which would be excluded from headline earnings.
Dirk van Vlaanderen, associate portfolio manager at Kagiso Asset Management, said the listerioris-affected Enterprise business is expected “to trend towards break-even then return to profitability in the medium term.”
“While difficult to gauge externally, one shouldn’t underestimate the level of management time that was required to deal with the crisis, which we believe had a detrimental impact on the remaining business units.”
However, management could now shift more focus to other areas of the business, he said, adding that while it is “impossible” to predict the outcome of the class-action law-suit, “we remain concerned about any potential damages that are not adequately covered by insurance”.
Tiger Brands CEO Lawrence MacDougall said passing higher input costs onto consumers would be “our biggest challenge in the next 12 to 18 months”.
Considering the risk to margins of low selling price increases and rising costs, “it’s going to be critical for us to get that under control”, he said.
The group’s shares were 1.4% up at R233.19 late Wednesday morning.