TIGER Brands chief executive Lawrence MacDougall says the maize business saw the most significant period-on-period decline. Reuters
JOHANNESBURG – Tiger Brands said on Wednesday that it had slashed its interim dividend by 15 percent in the half year to March as the group grappled with the aftermath of the listeriosis outbreak that claimed 120 lives last year.

The JSE-listed food packaging company said operating income from its grains business also plummeted 25 percent to R788 million on onslaught from cheaper competitors, despite revenue increasing 2 percent to R6.7 billion.

Chief executive Lawrence MacDougall said the maize business saw the most significant period-on-period decline, driven by a less-favourable procurement position compared with last year.

MacDougall said the business’s operating income took a significant knock, with Jungle Oats, pasta and rice all showing declines.

He said all categories, except sorghum-based products, maize, pasta and baby care recorded selling inflation and price increases were not fully recovered, resulting in negative operating leverage.

“Power outages and social unrest continued to interrupt operations,” MacDougall said.

The group declared a special dividend of 306cents a share as a result of the once-off proceeds received from the Brimstone sale.

It said the payment of the special dividend was subject to South African Reserve Bank approval.

Tiger Brands offloaded its 5.9 percent stake in Oceana Group to Brimstone Investment Corporation for R581.44 million, in a move described as exiting its non-core assets.

Damon Buss and equity analyst at Cape Town-based Electus Fund Managers said that Tiger Brands had been hit by a double whammy of an inability to fully pass through rising cost inflation to consumers and lower volumes, which reduce manufacturing efficiencies and fixed cost recovery.

Buss said management had yet to deliver on its strategy to extract value from its brands.

“Tiger Brands have strong brands. However, inconsistent pricing strategies and a focus to protect market share rather than brand premiums and hence margins are eroding the value of brands rather than increasing them,” Buss said.

He said that while the listeriosis outbreak had a negative impact on the company, its core divisions have deteriorated.

“The grains and consumer business have been struggling in an increasingly competitive environment,” Buss said.

The group said headline earnings a share from continuing operations fell 12 percent to 762c from 868c last year.

The company declared a 321c a share interim dividend, which was down from 378c a share declared last year. It also declared a special dividend of 306c per share from proceeds of the Brimstone sale.

Despite the headwinds the company saw improvements in the baby care category, whose revenue grew by 22 percent to R476m, driven by baby food. The home care and personal care categories also recorded improvements.

Group revenue of R15.4 billion from continuing operations was down 2 percent compared with the corresponding period last year, which included Easter seasonal volumes.

Tiger Brands shares closed unchanged at R230 on the JSE on Wednesday.

BUSINESS REPORT