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.
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“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.
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