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Tiger Brands revenue falls short after challenges at meat unit

Tiger Brands had to suspend operations at its cold meat facilities last year in response to a deadly listeria outbreak, which resulted in recall and related costs. They have since reopened.

Picture: Supplied.

JOHANNESBURG – South Africa’s Tiger Brands on Wednesday reported first-half revenue below analysts’ expectations on the back of lower sales in international markets and challenges relating to the processed meats division.

The country’s leading food producer, with brands such as Jungle Oats and Tastic rice, said group revenue for the six months ended 31 March fell by 2% to R15.4 billion, compared with analysts’ expectations of R15.7 billion in a Refinitiv poll.

Excluding the Value Added Meat Products (VAMP) division, revenue was up 4%.

Tiger Brands had to suspend operations at its cold meat facilities last year in response to a deadly listeria outbreak, which resulted in recall and related costs. They have since reopened.

But that division’s performance was impacted by challenges in managing the factory’s re-opening and product launch logistics, which saw revenue tumble by 79% and an operating loss of R296 million.

Domestic revenue excluding VAMP was 6% higher, driven by volume growth and inflation at 4%. While revenue from exports and international markets fell by 11% due to lower export volumes and price deflation in international markets.

South African retailers and food producers are struggling to lift sales growth to double digits as consumers are dealing with a value-added tax hike, record fuel increases and rising utility costs, which have all intensified pressure on consumers’ disposable income.

The food producer said all categories, except sorghum-based products, maize, pasta and Baby Care recorded selling price inflation, however, the increases were not sufficient “to fully recover cost increases, resulting in negative operating leverage.”

Tiger Brands and its peers are grappling with an industry that has become more competitive as manufacturers attempt to find the balance between maintaining volumes and pricing pressures, forcing them to dip into their margins to stay competitive.

Headline earnings per share (HEPS) from continuing operations in the period dropped by 12% to 762 cents from 868 cents a year earlier.

Tiger Brands declared an interim dividend of 321 cents per share for the first half to March, down 15% due to lower earnings. It also declared a special dividend of 306 cents per share as a result of the once-off proceeds received from the Brimstone sale.

At 0717 shares in Tiger Brands were up 1.65%.

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