Johannesburg - Tiger Brands’ share price shot up on Friday after the company announced that its chief executive would leave at the end of the year.
The shares gained as much as 7.43 percent to R318, the highest since April 28, before closing up 4.39 percent on the day at R309 a share.
The writing has been on the wall for Tiger Brands chief executive Peter Matlare since he entered into a R1.5 billion deal to acquire a majority stake in Dangote Flour Mills.
Matlare will step down after presiding over declining profit at Tiger Brands and a write-down in the value of the company’s Nigerian unit.
Another ill-fated acquisition that has hurt Tiger Brands is the 51 percent stake the company bought in 2008 in Haco Industries’ operation in Kenya.
Matlare, who has been chief executive for more than seven years, oversaw the 2012 purchase of a majority stake in Dangote Flour Mills of Nigeria for about $152 million (R2bn at Friday’s rate) and the subsequent write-down of almost half that value.
The food producer said earlier this year that the unprofitable unit might have to raise funds through a rights issue.
“Investors were very concerned over the decisions that have been made, especially in Nigeria, but also with the loss of market share in South Africa in certain key categories,” Sumil Seeraj, a Johannesburg-based analyst at Standard Bank Group, said.
Losing market share
“They were losing significant market share in bakeries. That opened up a space for competitors to move in and establish themselves.”
Other than the two problematic acquisitions, Matlare’s tenure was dogged by declining market share in South Africa, where the group made most of its revenue after he left the door open to competitors to snag flustered consumers weighed down by a depressed economic environment.
“The writing has been on the wall for sometime. Peter is a sincere sort of guy, but things have been against him,” Cratos Wealth portfolio manager Ron Klipin said.
Tiger Brands profit fell in the six months ended March as the group was dragged down by losses in Nigeria and profit manipulation in Kenya, which countered the growth in its home market.
Earnings per share excluding one-time items will probably fall by about 2 percent to R17.83 for the full year.
The stock has declined 16 percent this year, valuing the company at R59bn.
Klipin said Matlare’s downfall was being hasty in acquiring a stake in Dangote without doing a proper due diligence, which led to impairments of more than half the value.
He said in the South African market, Tiger Brands had battled to sustain its supremacy.
Competitors including Pioneer Foods are challenging Tiger Brands in the growth of bread sales, which account for about a third of the company’s revenue in its home market, according to statements from both producers.
Pioneer shares have gained 36 percent this year.
* Additional reporting by Bloomberg
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