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Tiger Brands shares take hit on ‘bleak future’

Tiger Brands slid nearly 6 percent on the JSE yesterday after it slammed the brakes on dividend payments because of what it said would be a bleak future following a difficult trading period in the first half of the financial year as profits crashed.

The packaged goods company said it would be forced to implement massive job cuts as lockdown restrictions weighed on its supply chain and disrupted margins.

Chief executive Noel Doyle said Tiger Brands expected coronavirus-related costs to hit profits in the second half, due to the weakness of the rand, global supply chain disruptions and additional costs incurred during the lockdown.

“These costs, together with the effect of government regulations on pricing during the national disaster period, may have an impact in excess of R500million on profitability,” Doyle said.

Boyle said the group might resort to some cost-cutting measures, which included possible job losses. However, he said it was difficult to provide the exact number of jobs that would be lost.

Tiger Brands – the maker of Jungle Oats and Tastic Rice, Fattis and Monis, All Gold and Oros – reported a 75percent decline in earnings per share to 221cents, impacted by R557m impairment charges. The group said headline earnings per share tumbled 35percent to 501c.

TIGER Brands – the maker of Jungle Oats and Tastic Rice, Fattis and Monis, All Gold and Oros – reported a 75 percent decline in earnings per share to 221 cents, impacted by R557 million in impairment charges. Reuters

Operating income fell 29percent to R1.1billion, with operating profit margins declining to 7percent from 10.2percent on lower volumes, raw materials and conversion costs rising ahead of inflation, and increased marketing investment.

“The results were disappointing,” Doyle said. “The overall performance reflects the difficult trading environment and the challenges faced, particularly within grains, groceries, value-added meat products and exports.”

The group said its revenue increased 2percent to R15.7bn, with price inflation of 4percent offset by an overall volume decline of 2percent.

Boyle said the pace at which the country was moving through the lockdown phases remained unpredictable and had a bearing on the company’s fortunes.

“We are prioritising the building of adequate stock cover to cater for the possibility of potential disruptions to the supply chain and ensure the consistent availability of our products,” he said. “In the short to medium term, cognisant of a constrained consumer, we will prioritise innovation towards value offerings, while re-engineering our business to optimise costs and improve efficiencies.”

Citadel trader Jordan Weir said the results were underwhelming and in line with the country’s economic developments.

Weir said Tiger Brands faced unprecedented times, as was the case with most companies in South Africa.

“If anything, Tiger’s results and the negative impact of the coronavirus-induced lockdowns more than likely foreshadow a tough year ahead for the retail sector at large and the local economy alike,” Weir said. “With cost cutting, in the form of job losses, and withheld dividend payments to shareholders, the current trading environment is likely to see many similar stories in the coming months ahead.”

Tiger Brands closed 5.65percent weaker at R152.55 on the JSE yesterday.

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