Tiger Brands commits not to raise prices during lockdown
Africa’s largest packaged goods company said yesterday that while the regulations allowed for price increases to be taken, which were supported by valid input cost increases, such price increases might not enhance profit margins beyond those prevailing for the three-month period up to February 29.
“This does have the effect of reducing the company’s ability to recover cost increases preceding this three-month period, where such price increases were deferred, or to fully recover year-on-year cost increases where price increases are normally scheduled to be taken annually or semi-annually,” the group said.
The owner of brands such as Tastic, Fatti’s & Moni’s, Albany and Jungle Oats has kept its operations open during the lockdown, because its manufacturing and distribution sites have been identified as essential services, with workers heeding the call with 100percent attendance at work.
“This has allowed us to ensure that for the most part, with rice and pasta being notable exceptions, we have been able to meet all customers orders for key stock items. Unless we experience site closures due to staffing constraints or revised regulations, we anticipate being in a position to maintain consistent supply for the period of the lockdown as well as through the months of April and May,” the group said.
However, Tiger Brands said given the speed with which the Covid-19 was developing, there was uncertainty around its ultimate impact.
“Consequently, the overall impact on our financial and operating performance cannot be reasonably estimated at this time,” Tiger Brands said.
The weaker rand would also effect the import of raw materials.
While these costs might be recovered through price increases, Tiger Brands said, the impact on consumer demand needed to be fully understood.
“The annualised impact on costs of a 5percent depreciation of the rand against the rates originally budgeted of R15.50 to the US dollar is in excess of $600million (R11.02billion),” the group said.
The rand was trading at R18.22 to the US dollar yesterday afternoon.
Tiger Brands had received offers for its value added meat products, which was up for disposal as announced in February.
Tiger Brands, which is due to report its interim results on May 25, in February warned that it expected its half-year headline earnings to fall as much as 36percent.
Its shares closed 1.23percent lower at R177.63 on the JSE yesterday.