Tiger Brands: Releases H1-2023 Unaudited Results

Johannesburg / ZA. (tbl) Despite strong revenue growth, performance of South Africa’s Tiger Brands Limited for the six months ended 31 March 2023 was impacted by a challenging operating environment due to prolonged periods of loadshedding, while high levels of inflation and lower disposable income adversely impacted consumer behaviour in terms of volumes and basket mix. Total earnings were impacted by lower insurance proceeds received relative to the prior year, as well as higher financing costs.

Total revenue increased by 16 percent to R19,4 billion, driven by price inflation of 17 percent and overall volume declines of 1 percent. Volumes held steady in the Domestic Business, driven by a strong volume recovery in Bakeries, Snacks + Treats and Personal Care and good performances in Sorghum Breakfast, Rice, Beverages, and Out of Home. However, volume declines were recorded in flour to retail and wholesale customers, Sorghum Beverages, Groceries and Baby with a marginal decline in Home Care. The firm recovery in Export volumes was offset by a significant decline in Deciduous Fruit volumes.

Although cost saving initiatives and supply chain efficiencies are delivering ahead of plan, these were not enough to counter the high level of input cost inflation, further impacted by the cost of operating in a constrained electricity environment. The total cost of loadshedding amounted to ZAR 76 million for the period relative to ZAR 12 million in the corresponding period last year, resulting in incremental energy costs of ZAR 48 million. As a result, gross margins declined to 27,0 percent from 29,2 percent last year. Group operating income (before impairments and non-operational items) decreased by 9 percent to ZAR 1,4 billion. Group operating income in the prior period benefited from insurance proceeds amounting to ZAR 161 million related to a product recall and civil unrest that took place in July 2021. In H1-2023, insurance proceeds amounted to ZAR 20 million. Excluding the impact of these proceeds, group operating income declined by 2 percent and group operating margins decreased to 6,9 percent from 7,9 percent.

Income from associates increased by 51 percent to ZAR 275 million, with Carozzi delivering a strong top line performance while National Foods also reported a satisfactory trading performance. Earnings from Carozzi also benefited from favourable currency translation gains.

Net financing costs for the period amounted to ZAR 94 million compared to ZAR 34 million last year as a result of higher financing costs due to higher average debt levels and higher interest rates. Cash generated from operations was affected by higher working capital investment primarily due to an increase in trade receivables while last year’s share buy-back programme impacted opening cash balances. A net foreign exchange loss of ZAR 15 million resulted from the strengthening of the rand against other major currencies, negatively impacting the translation of foreign currency balances. In the same period last year, there was a net foreign exchange gain of ZAR 5 million. The group’s effective tax rate before non-operational items and income from associates increased slightly from 29,6 percent last year to 29,7 percent (Table: Tiger Brands).