Monday, January 24

Tiger Brands to Cut Costs by R450m as Full-Year Profits Fall

Tiger Brands, the listed fast-moving consumer goods manufacturing giant (FMCG), will cut costs by R450 million in its fiscal 2022 after the recall of around 20 million canned vegetable products and riots. July cost R732 million before taxes.

On Friday, the group released its annual results for the full year ending September 2021, which showed earnings per share (Heps) plummeting 6%. His last Heps was 1,127 cents, compared to 1,196 cents in his previous financial year (2020).

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The drop in overall profit and also operating profit was largely due to the consequences of losses incurred due to the recall of Koo and Hugo canned vegetable products along with the impacts of unrest observed in KwaZulu-Natal and parts of Gauteng. in July.

Operating income (profit) from continuing operations fell about 10% to R2.2 billion.

However, Tiger Brands noted in its Sens statement of full-year results that excluding product recall and civil unrest, operating income actually rose 20% to R3 billion.

The owner of well-known food brands such as Oros, Jungle Oats, Albany Bread and Purity, saw its gross margin drop to 28.5% (2020: 30.1%) and operating margin drop to 7.2% (2020: 8.3%).

Read: Tiger Brands targets a deal to invest in the nutrition business

The group’s total revenue, excluding the effects of product recalls and civil unrest, increased by 5% to R31.2 billion, but this was based on a 7% price inflation and was partially offset by a decrease in 2% volume.

‘Bitter cocktail’

Commenting on the results, Just One Lap’s Simon Brown told Moneyweb that the moving parts of rising input costs were related to rising raw material prices, along with costs from the riots and mishap. of Tiger Brands that led to the recall of millions of canned goods. products, all came together in a bitter cocktail of poor results.

“There are a lot of moving parts here and generally a poor set of results, although, like I said, it’s not all their fault … But if you look at the civil unrest and the product recall, it probably went down by a 12% or 14% overall earnings per share, ”he said.

Brown praised the consumer goods producer for continuing with its cost-cutting measures and said the company has done most of the heavy lifting in this regard.

Salary protests

Tiger Brands’ latest results come as workers at its Beacon Sweets and Chocolate factory in KwaZulu-Natal have been on a wage strike for more than a week.

Those who are members of the Allied African Meat Industry Union (Amitu) embarked on an indefinite strike last week after negotiations with Tiger Brands for a 7% pay increase came to a standstill.

Instead, the JSE-listed group has offered the union a 3% raise.

Tiger Brands CEO Noel Doyle told Moneyweb during an earnings briefing on Friday that the protest could have a significant impact on the group’s performance if the strike continues.

He said the union has “excessive expectations” that Tiger Brands as a company cannot meet, given the group’s latest financial performance.

“The strike in KwaZulu-Natal has been going on for just over a week now. We have a meeting scheduled for Monday. [November 22] … The impact of the strike, if it lasts much longer, could be quite significant, ”said Doyle.

However, according to Brown, the wage protests shouldn’t have too much of an impact on the business, especially since the snack and candy division benefited significantly from the work-from-home trend, which saw more people snacking from home.

Tiger Brands declared a total dividend of 826 cents for the year, showing a 23% increase over the prior financial year.

The group’s share price closed nearly 1% weaker on Friday, at R195.50 per share.

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