JSE-listed Tiger Brands has recorded a solid performance for the year ended September 30, driven by its core South African businesses, but this has been diminished by its international interests, such as its Nigerian business Tiger Branded Consumer Goods (TBCG), formerly Dangote Flour Mills.

The macroeconomic environment in Nigeria has deteriorated significantly. TBCG’s results were impacted in the third quarter by the delayed pass-through of raw material price increases arising from the naira’s devaluation in February, as well as fuel shortages and labour disruptions in the country’s trucking and port servicing industries.

“This, together with the continuing losses at TBCG, led the board of Tiger Brands to initiate a strategic review of its Nigerian operations,” the company explained in a statement on Thursday, in which it reiterated CEO Peter Matlare’s departure, effective December 31. The search for a successor was currently under way, with Noel Doyle appointed interim CEO, effective January 1.

During the year under review, TBCG management implemented initiatives on quality, distribution and innovation, reflecting overall volume growth of 20%, with flour volumes increasing by 18% and pasta volumes up 59%.

“The business made good progress in driving innovation. In this regard, smaller consumer pack sizes were successfully introduced for semolina and wholemeal products under the Tastic brand, while new Tastic pasta products were launched after the year end,” Tiger outlined.

This, however, did not result in any appreciable improvement in the level of operating losses as competition intensified in the deteriorating macroeconomic environment.

Therefore, after considerable and lengthy deliberations and having explored several options, the Tiger Brands board took the decision not to advance any further funding to TBCG and to impair its investment.

It was also necessary to further impair the group’s investment in Deli Foods.

The performance of Deli Foods was affected by currency devaluation and the breakdown of a key production line in the first quarter. The new replacement line was commissioned in November.

The financial impact of these impairments in the current year amounted to R1.9-billion.

Tiger Brands was also exploring various alternatives with respect to its shareholding in TBCG. To this end, it would, together with the TBCG board endeavour to find a suitable solution for TBCG’s operations in future.

On the other hand, in an increasingly competitive and demand-constrained domestic environment, volumes were maintained and turnover grew by 6%.

The company posted a domestic operating income increase of 11% to R3.6-billion for the year ended September 30, as well as an improved domestic operating margin – up from 14.5% to 15.2%. This, Tiger said, demonstrated the strength and resilience of the group’s brands in challenging trading conditions and the successful execution of its strategic intent, particularly with regard to increased innovation, higher marketing investment and ongoing cost management.

“Particularly pleasing were the improved performances of the Groceries, Home and Personal Care businesses which recorded improved margins and double digit profit growth. The Grains business achieved a solid result, regaining its market-leading position in the bread category, while improving its overall margins,” Tiger commented.

However, these strong domestic results were partially offset by underperformance in certain of its international operations, including TBCG.

Continued progress for the period under review was reflected from Chococam and Langeberg & Ashton Foods. However, the results were significantly impacted by the irregularities at Haco and the failure of a key distributor in Mozambique in the fourth quarter. 

“These issues have been addressed with an improved second-half performance from Haco and the recent appointment of a new distributor in Mozambique,” Tiger noted.

The group generated operating cash flows of R3.6-billion, which were deployed in funding capital expenditure (capex) of R882-million, dividends of R1.6-billion and tax payments of R1.2-billion.

The group’s working capital requirements increased owing to the normalisation of stock levels at Groceries, following the prior year’s production disruptions in baked beans and the timing of raw material procurement at year-end.

During the year, the group’s associate, Oceana, acquired the entire issued share capital of Daybrook Fisheries, a fishing company based in Louisiana, in the US. The acquisition was partly funded by a rights offer, with Tiger contributing R525-million.

The group continued to manage its capex programme “prudently”, focusing on return on capital while ensuring adequate investment in maintaining and replacing assets to sustain optimal operational efficiency and capability.

The outlook for the year ahead remained challenging, with the company highlighting the low domestic economic growth, rising costs and job security concerns weighing on the South African consumer.

“These factors are exacerbated by the weak rand, which is fuelling inflationary pressures and intensifying the competitive trading dynamics already evident. The macroeconomic outlook for the rest of sub-Saharan Africa is muted, while currency devaluations and foreign exchange liquidity are additional risks.”

However, Tiger Brands believed it was equipped with the brands, people and capability to address these challenges. “In addition, the group will continue to focus relentlessly on cost savings and efficiencies, as well as further investment in innovation, customer engagement and brand development.”