Tiger Brands’ operations suffered indirect and direct Covid-19-related costs of about R400 million in the year to the end of September. Picture: Siphiwe Sibeko/Reuters
Tiger Brands’ operations suffered indirect and direct Covid-19-related costs of about R400 million in the year to the end of September. Picture: Siphiwe Sibeko/Reuters

Tiger Brands’ operations take R400m hit from Covid-19-related costs

By Sandile Mchunu Time of article published Nov 23, 2020

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DURBAN - TIGER Brands’ operations suffered indirect and direct Covid-19-related costs of about R400 million in the year to the end of September.

Chief executive Noel Doyle said on Friday that half of that amount was attributable to direct costs.

Covid-19-related costs, the impact of the tough economic environment on consumer spending and input cost increases resulted in the group reporting a 23 percent decline in headline earnings per share from continuing operations, to 1 196 cents a share.

Despite this, the packaged goods company – whose brands include Albany, Jungle Oats, Ace and Oros – declared a total dividend of 670c during the year.

Doyle said the closure of non-essential facilities, increased spend directed toward prioritising the health and safety of employees and temporary disruptions from Covid-19 infections at site level adversely affected the efficiency of the group’s supply chain.

“Other cost drivers included compliance with the consumer and customer protection and national disaster pricing regulations. The results have been disappointing, reflecting the challenges faced by the company in maintaining margins in what was an already difficult consumer environment before the onset of the Covid-19 pandemic,” Doyle said.

But group revenue from continuing operations increased by 4 percent to R29.8 billion, supported by price inflation of 6 percent, driven largely by currency weakness for most of the year, but this was partially offset by an overall volume decrease of 2 percent.

The group said a decline in volumes in certain categories, coupled with the inability to fully recover significant raw material cost push, placed gross margins under pressure, resulting in group operating income declining by 18 percent to R2.6bn.

Its earnings per share from continuing operations fell by 66 percent to 886c, mainly because earnings in 2019 benefited from the fair value gain relating to the unbundling of the company’s interest in Oceana Group, including the capital profit realised on the disposal of the company’s residual shareholding in Oceana.

“We have been very fortunate because our cash flow was very healthy and we are confident of our business going forward, and we managed to declare a dividend despite the tough operating environment,” Doyle said.

Despite a challenging year, the group saw improved underlying performance in the second half of the financial year, driven by sustained demand within the wheat, milling, bread, oat-based breakfast offerings, pasta and groceries, primarily due to increased at-home consumption during the lockdown.

But the group said this was offset by lower consumer demand in other categories during the same period, particularly in snacks and treats, beverages, out of home and baby.

Looking ahead, Doyle said it is likely that the significant economic downturn will continue into next year.

Tiger Brands’ shares closed 1.76 percent lower at R203.80 on the JSE on Friday.

BUSINESS REPORT

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