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Manufacturing news

International business boosts Tiger's results

South Africa's largest food company‚ Tiger Brands (TBS)‚ reported an 11% increase in revenue to R22.7bn for the year to September‚ amid a slowdown in consumer spending in the face of weaker business confidence and rising cost pressures
Despite low interest rates‚ local consumers remain under pressure because of high levels of unemployment and indebtedness‚ rising costs and inflation.

Tiger Brands‚ whose net income grew 5% to R2.7bn for the period‚ said above inflationary cost increases had been affecting real disposable incomes and consumers continued to make tough choices in their spending decisions‚ cutting back on consumption levels where necessary and widening their brand repertoire to include economy alternatives.

The group‚ which owns All Gold‚ Tastic and Koo posted a 7.1% rise in diluted headline earnings per share to 1‚654.2c.

Chief executive Peter Matlare said the group's star performers over the period under review were its exports and international businesses.

"Our international businesses as a whole, in East‚ West and Central Africa, have done exceptionally well. We've seen some improvements not only in operating margins but in market penetration‚" he said.

Domestic sales volumes declined by 3% due to increased competition across most categories‚ the company said.

According to Avior equity analyst Jiten Bechoo‚ the group's results came in "more or less as expected".

"What was pleasing was that the milling and baking margins - which are quite important because they're quite a big contributor to group profits - didn't decline as much as the market was expecting. There was a lot of concern before‚ so that was a positive surprise. The general performance of the other operations to a large extent offset that performance‚" Bechoo said.

Tiger Brands said growth on the balance of the African continent was more robust and the group's prior year acquisitions had performed well. As part of its African expansion‚ the company, earlier this year, bought a 63.35% stake in Dangote Flour Mills‚ the second largest flour milling company in Nigeria for R1.5bn. According to Matlare‚ the company would look to increase its share in the business to 70%.

The company also acquired Davita Trading last year to strengthen its distribution network across Africa.

"The Davita acquisition was a good one. The other [African] businesses are volatile and did not perform as well. The nature of the Davita business‚ which uses a South African manufacturing base to export products into Africa, has achieved better margins compared with buying companies‚ refurbishing equipment and building brands from within. For businesses that you buy in Africa‚ the return on invested capital is low‚" Bechoo said.


SOURCE

I-Net Bridge
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