South Africa’s biggest consumer foods maker Tiger Brands Ltd reported a slowdown in quarterly sales due to weak demand at home and poor performance at its Nigerian unit.
Sales rose 7 percent to 8.2 billion rand ($707.83 million) in the three months to end-December, slower than a 10 percent growth during the same quarter a year earlier, Tiger Brands said in a statement on Monday.
Shares in the maker of bread, breakfast cereals and energy drinks slumped 5.04 percent to 372.70 rand by 1349 GMT, on course for the biggest daily percentage decline since July 2013.
Consumer demand in Africa’s biggest economy remains tepid due to tentative economic growth while the weaker rand currency fuels inflation and pushes up the price of imported goods.
In response, South African companies are looking to the rest of Africa to boost returns with Tiger Brands saying the acquisition of Nigeria’s Dangote Flour Mills was at the heart of its expansion on the continent.
But the Johannesburg-based company has been trying to turn profit from Dangote Flour since paying nearly $200 million for a controlling stake two years ago as part of broader plan to expand into the rest of Africa to offset slow growth at home.
The performance of Dangote Flour was affected by the devaluation of the naira currency, which resulted in higher input costs that could not be fully recovered in product pricing due to the competitive environment, the firm said.
“The short term prospects for the Nigerian businesses remain extremely challenging,” it said.
Tiger Brands, which competes with Nestle Nigeria Plc in Africa’s biggest economy, wrote down the value of Dangote Flour for the second time in less than a year in November following a review of utilisation levels.