Given the sustained weakness of the rand, JSE-listed Tiger Brands said on Tuesday that it was likely that the inflationary pressures on the group’s raw material cost base would intensify over the balance of the year.
“In a constrained consumer environment, where competition is intense, it is expected that trading conditions will remain challenging as the company seeks to pass through price increases,” Tiger Brands advised in a statement to shareholders.
However, the company believed its portfolio of “market-leading” brands, together with a rigorous focus on cost control would help to mitigate these challenges.
Volumes and margins would also continue to be managed “judiciously” to ensure long-term sustainable profit growth.
The group achieved a 7% increase in turnover from continuing operations in the four months ended January 31, compared with the prior corresponding period.
During this period, domestic sales volumes softened marginally as a result of increased levels of pricing pressure and a slow-down in consumer demand. “With consumers under considerable financial pressure, the impact of the depreciating rand and rising soft commodity prices were only partially offset by price increases,” Tiger Brands explained.
Conversely, benefiting from rand weakness, as well as the turnaround of underperforming operations, the exports and international businesses delivered an improved underlying performance.
Meanwhile, Tiger Brands had made progress with regard to divestment in its lossmaking Nigerian division Tiger Branded Consumer Goods (TBCG), formerly Dangote Flour Mills.
Further to its December 14, 2015, announcement, regarding the disposal of its 65.7% shareholding in TBCG to Dangote Industries, the company had obtained the approval of the South African Reserve Bank and the Securities and Exchange Commission of Nigeria.
The only remaining condition was the approval of the Nigerian Stock Exchange, which Tiger Brands expected shortly.