Tiger Brands: up over four percent on H1/2009 profit

Johannesburg / ZA. (tbl) Tiger Brands Limited reported a 16 percent decline in diluted headline earnings per share of 6,245 South African Rand (ZAR) for the six months ended March 2009 from 7,395 ZAR a year ago. An interim dividend of 2,45 ZAR per share was declared, which is in line with that of 2008.

HEPS from continuing operations amounted to 6,071 ZAR – an eight percent increase on that achieved in the six months ended March 2008. Earnings per share (EPS) from continuing operations increased by 24 percent to 6,107 ZAR per share.

Turnover growth by operating segment

Source: Tiger Brands Limited

The group said in a statement (PDF, 21 pages, 42 KB) the higher percentage improvement in EPS compared to HEPS is primarily due to the inclusion in March 2008 of an abnormal charge of 112,3 million ZAR, which related to the impairment of the carrying value of the goodwill associated with the Beverages business.

Total group HEPS decreased by 17 percent to 6,273 ZAR compared to the same period last year. Total headline earnings of 984 million ZAR and group profit attributable to ordinary shareholders of 990,1 million ZAR are not directly comparable with the 2008 results as the prior year includes the results of the unbundled Healthcare interests.

The costs in respect of the approach to AVI adversely affected the rate of decline in total HEPS and EPS by approximately 2,7 percent and 3,0 percent respectively.

The group said the unbundling and separate listing of the Healthcare interests in August 2008, coupled with the planned disposal of the interest in Sea Harvest this year, has given rise for the need to distinguish between earnings from continuing operations, which exclude the Healthcare and Sea Harvest results, and total group earnings which include the Healthcare results for the comparative period ended 31 March 2008, as well as the results of Sea Harvest in both the comparative and current reporting periods, it said.

Costs of 32.6 million ZAR were also incurred in the current period relating to the unsuccessful attempt by Tiger Brands to acquire the entire issued share capital of AVI. Excluding these costs, HEPS and EPS from continuing operations would have increased by twelve percent and 28 percent respectively.

The group said the trading environment was characterised by significant raw material cost increases, high interest rates and a weakening ZAR exchange rate. As a result of these and other factors, consumers have altered their buying patterns which have had a negative impact on volumes in many categories in which the company operates.

Turnover from continuing operations increased by 24 percent compared with the same period last year. The turnover increase was particularly pronounced in the Grains division, reflecting the substantial increases in raw material commodity costs which had been partially absorbed in the comparative period.

The total operating margin from continuing operations of 14,4 percent compared with 13,8 percent reflected a recovery from the previous period in which certain raw material cost increases were partially absorbed by the group.

The Milling and Baking, Groceries, Snacks + Treats, Beverages, Exports and Fishing businesses all contributed to the operating margin improvement while Other Grains, Value Added Meat Products, Out of Home and Consumer Healthcare continued to experience pressure on margins.

«Overall the Group delivered a pleasing growth in operating income of 29 percent (2008: 15 percent) allowing it to adequately cover the increased cost of funding the higher working capital requirements», Tiger Brands said.

Earnings from associates for the half year reflect the improved contribution from Chilean-based Empresas Carozzi. The improved contribution primarily comprises a capital profit of 16,8 million ZAR arising on the part sale of a subsidiary and the benefits of a stronger Chilean Peso.

The increased share of income attributable to minorities is due to the improved levels of profitability in the Deciduous Fruit business as well as the minorities´ share of current year income attributable to the two African acquisitions, Haco and Chococam, which were concluded during the second half of 2008.

Strong performances compared to the first six months of the prior year were experienced in most FMCG categories despite underlying consumer demand having weakened. The prior year trend of increasing cost push inflation, which accelerated in the second half of 2008 across all categories, continued into the current reporting period.

Looking ahead the group said although interest rates are expected to decline further, it is likely to continue to experience difficult trading conditions for the remainder of the year, caused by ongoing pressure on consumer spending. In addition, the recent strengthening of the ZAR will have an adverse impact on the group’s export earnings.

Notwithstanding these factors, headline earnings per share is expected to show modest growth in real terms for the full year, the group concluded.

Further information: The groups statement (PDF, 21 pages, 42 KB) and a detailed
presentation (PDF, 68 pages, 2’506 KB) are available on Tiger Brands´ server.