Tiger Brands forecasts profit increase

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TigerBrandsAce Ex-QDMS

Consumer goods group Tiger Brands (TBS) on Wednesday posted a 7.1% rise in diluted headline earnings per share in the year ended September 2012 to 1‚654.2 cents compared with the same period a year ago.

A final ordinary dividend of 555.0 cents per share was declared.

Group turnover increased by 11% to R22.7 billion‚ driven primarily by domestic pricing inflation of 8% and a solid contribution from exports and the international businesses.

Domestic sales volumes declined by 3% due to increased competition across most categories‚ the company said.

Strong volume and pricing growth underpinned the 53% increase in turnover from exports and the international businesses‚ with foreign currency translation gains contributing approximately 8% of this growth.

Operating income increased by 7% to R3.5 billion. Excluding the effect of the IFRS 2 cash-settled share option charges‚ operating income grew by 9% to R3.6 billion.

“The 2012 financial year was challenging‚ reflecting in broad measure the state of the South African economy. Intense market competition and muted domestic growth were compounded by significantly increased volatility in the pricing of soft commodities‚ which negatively affected the food sector. Consumer spending‚ which had previously been the main driver of domestic demand‚ slowed in the face of weaker business confidence and rising cost pressures‚” Tiger said in a statement.

The group’s operating margin compressed by 60 basis points to 15.3% due to the substantial cost inflation experienced during the year‚ which was exacerbated by increased volatility in agricultural soft commodity prices and the weak rand exchange rate.

Tiger said the outlook for the year ahead remains challenging and the high levels of inflation and volatility in the soft commodity market are likely to persist‚ exacerbated by the current weakness in the Rand exchange rate.

It added the overarching goal is to reposition its domestic businesses for growth‚ by lowering their cost base to ensure long-term competitiveness.

Over the last three years‚ volumes have softened across a number of product categories due to pricing differentials relative to economy brands and increased competition from private label offerings. - I-Net Bridge

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