Turnaround of Dangote ‘remains key objective’ for Tiger Brands

Tiger Brands on Wednesday reported “satisfactory” results for its six months ended March, with headline earn¬ings per share (HEPS) from continuing operations up 7% to R8.56, reports Business¬Day South Africa.
CEO Peter Matlare said the group was “making steady progress in implementing key strategic initiatives aimed at regaining market share and further strengthening its core brands.”
Turnover from continu¬ing operations, at R14.9bn, was 11% higher than the corresponding figure in the prior year. Turnover for the domestic businesses was R11.2bn, an improvement of 8%. Domestic sales volumes increased by 4%, with sell¬ing price increases “gener¬ally in line with or below inflation”, Tiger Brands said.
The export and interna¬tional businesses, including Nigeria where its Dangote Flour Mills business contin¬ues to underperform, grew turnover by 20% to R3.7bn. Sales volumes were strong, “but this was offset by pres¬sure on volumes at Dangote primarily due to intense competitor activities.”
“Tiger Brands experi¬enced significant cost infla¬tion in the first half, partly due to the rapid decline in the rand exchange rate. This was not fully recovered in pric¬ing and negatively affected our margins, but we are ex¬pecting this margin erosion to ease over the balance of the year as pricing is ad¬justed to partially absorb the higher costs,” Matlare said. “However, the group will continue to partially absorb cost increases in a number of categories, mitigating the im¬pact where possible through cost-reduction initiatives and improved efficiencies.”
Matlare said the turna¬round in the performance of Dangote over the me¬dium terms “remains a key objective”.
“We are currently imple¬menting short to medium action plans, which include reducing Dangote’s fixed cost base, mothballing of mills where appropriate and rebuilding the brand equity of its product basket. The successful implementa¬tion of these initiatives will improve the overall outlook for the business in the longer term,” he said.
Given the underper¬formance of Dangote and the excess milling capacity that continued to rise in the Nigerian flour market, the board fully impaired the car¬rying value of the goodwill and intangible assets relating to the company’s investment in Dangote. The value of this impairment is R849m.