Companies / 15 October 2018, 07:00am / Sandile Mchunu
DURBAN – Tiger Brands’ share price rose by more than 5 percent on the JSE after the group announced that it would re-open its Germiston value-added meat products processing facility, which was affected by the listeriosis outbreak.
The Germiston facility was closed in March as a precautionary measure after the listeriosis bacteria was detected there. The group also recalled all ready-to-eat Snax products.
It also closed its Polokwane and Pretoria sites and Clayville abattoir.
However, on Friday the group said after rigorous assessments of the factory were completed, the Ekurhuleni Department of Health issued a certificate of acceptability to the company for the Germiston processing facility.
“This endorses the factory’s standards and operating procedures for the safe processing of food products. Production of ready-to-cook products, comprising bacon and frozen sausages, was expected to commence on October 12. Salami production will also commence on this date,” the group said.
The group added that while such certification could only be awarded by local authorities, the process was supported by the National Department of Health.
It was estimated that around 200 people died in South Africa due to the outbreak.
The opening was cheered by the group’s share price as it climbed to R260.33 a share on Friday afternoon, up from Thursday’s closing price of R246. However, the share price was still trading below the R456.59 it opened the year on.
Nick Crail, a senior fund manager at Ashburton, said the company has indicated that it would re-open and relaunch its Enterprise brand over time.
“This is a big step in that direction. In terms of importance to the group’s revenues and profits, these operations are of minor importance,” said Crail.
He added that sentiment and news flow has been very negative for this company and the sector for some time, so this positive development was good for the share price.
Andrew Dittberner, a chief investment officer at Private Client Securities: Old Mutual Wealth, said the effect of the closing down would be seen in their upcoming full-year results.
“We expect it to be material, as indicated in their latest trading statement. Despite reopening the facilities, what will be critical is how quickly they can regain market share and return that division to profitability.
“There is no doubt that they have suffered brand impairment from this episode. The division will potentially remain a drag on the business for some time to come,” Dittberner said.
“Tiger Brands was not the only counter to move higher on Friday. It had also communicated that the facilities were due to be re-opened by the end of September, so this announcement should not have taken the market by surprise,” he said.