Tiger Brands Limited, South Africa’s biggest food producer, said its Nigerian unit would take as many as 12 months longer than expected to become profitable due to the weaker naira and falling oil price.
The maker of Jungle Oats and Black Cat peanut butter reported an operating loss of 281.9 million rand ($24.2m) in Nigeria for the year through September, and doesn’t anticipate a return to profit until 2017, CEO Peter Matlare told reporters on a Tuesday conference call. The company said in 2014 the unit would become profitable within two years.
“We would say six and maximum 12 months more than indicated,” Matlare said. “ With the oil price dropping the way that it has, it is clear that the impact on the Nigerian consumer will be quite significant.”
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The price of crude oil, which makes up almost all of Nigeria’s exports, has halved since June while the naira weakened to more than 200 per US dollar for the first time on Tuesday.
Attacks by Islamist group Boko Haram, which led to the postponement of elections until next month, have also hurt the business, Matlare said.
The naira is “important in our lives because we import a vested amount of wheat for our mills,” he said. “We are impacted by the activity, especially in the east, driven by Boko Haram.”
Tiger Brands, based in Johannesburg, bought a 64 percent stake in Dangote Flour Mills from Dangote Industries Limited in September 2012 for about $173 million, its third and largest purchase in Nigeria.
It impaired the value of the business twice last year. The shares declined 2.4 percent to 362.95 rand as of 3:20 p.m. in Johannesburg.
