South Africa’s Tiger Brands boosts exports after resolving legal dispute in Nigeria
Tiger Brands has resolved a legal dispute with the erstwhile distributor of its Benny and Jolly Jus products in Nigeria, and in the process has improved its export performance.
The sales of products resumed in August 2020, according to the company’s latest update to the market.
The listed South African food producer has also made headway in the sale of its assets at Deli Foods in Nigeria.
The asset sale is part of a broader reworking of Tiger Brands’ business model, a cost-reduction exercise and an accelerated portfolio optimisation.
The company has disposed of its value-added meat products business. It is currently in the process of exiting its deciduous fruits business.
“The preparatory components of the sale process [for the deciduous fruit business] have been concluded and engagements with a list of potential buyers, as part of an initial expression of interest process, have commenced,” according to Tiger Brands.
“These developments, together with an improved export performance as a result of the resolution of the legal dispute in Nigeria, are likely to strengthen the company’s core portfolio going forward,” the company said.
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Tiger Brands’ results for the year ending 30 September 2020 are scheduled for release on 20 November 2020.
The company projects that for the year ending 30 September 2020:
- Earnings per share (EPS) from total operations will be between 76% and 79% lower than the previous financial year. That is between R17.71 and R18.43, compared to the previous year’s reported EPS of R23.33.
- Headline earnings per share (HEPS) from total operations will drop between 35% and 40%. That translates into R4.60 and R5.32. That is below the previous year’s reported HEPS of R13.22.
“The ranges reflect the poor first half performance, but include an improved underlying performance expected in the second half,” according to the company.
However, the improvements in the second half have been “offset by the impact of COVID-19 related costs … [and] restructuring costs estimated at R70m as a result of adopting a fit-for-future operating model.”
The COVID-19 costs relate to compliance to the Consumer and Customer Protection and National Disaster Regulations and the company not instituting price increases when South Africa’s lockdown commenced towards the end of March 2020.
- “The cost of complying with the Consumer and Customer Protection and National Disaster Regulations is estimated to be R175m for the three months to June. And a further R127m for the three months ending 30 September 2020.”
- “This is significant when compared with an operating profit from continuing operations in the corresponding six-month period last year of R1.4bn.”
The company has initiated engagement with regulators about the future construct and interpretation of these regulations, it said.
New consumption trends
Volumes from its vast portfolio showcased how at-home consumption affected various product categories. Baby nutrition, deciduous fruit, beverages and the out-of-home channel have been negatively impacted.
But rice, pasta, breakfast oats, groceries and home and personal care categories volumes have experienced a significant lift because of at-home consumption.
As a result, revenue from continuing operations for the three months to June rose 11% to R7.2bn. This comprised 4% volume growth, 5% price inflation and a positive foreign exchange impact of 2%.
However, operating income declined marginally mainly because of to COVID-19 related costs.