Tiger Brands takes $82 million writedown on loss-making Dangote Flour

Tiger Brands, South Africa’s largest food company, will write off about half of its investment in Dangote Flour Mills less than two years after buying a 63.5%  majority stake in the Nigeria-based producer for about $190-million.

The South Africa-based Tiger Brands, on Thursday, took a 849 million rand ($82 million) writedown on Dangote Flour Mills as it struggles with tough competition and weak margins.

Africa’s second-biggest consumer foods maker, which also flagged as much as a 9 percent rise in first-half profit, has been trying to make money out of Dangote Flour Mills since paying $188 million for about a 63 percent stake in the maker of flour and pasta two years ago.

But Dangote Flour Mills, which suffered a $17.4 million quarterly loss in February, is struggling with tough competition that has forced it to heavily discount its products.

“The company continues to believe that Nigeria is central to its expansionary ambitions,” Tiger Brands said in a statement.

Tiger Brands is expanding further into the rest of Africa to offset slow growth at home, where debt-laden consumers are cutting back on spending and a weaker rand currency pushes up input costs.

The company said first-half headline earnings per share – which excludes the write off – would increase by 5 to 9 percent as it grapples with high input costs and slowing consumer spending.

Headline EPS, the primary profit measure in South Africa, strips out certain one off items.