South Africa's largest food producer Tiger Brands posted a 2% drop in half-year earnings on Wednesday, 25 May, hit by a poor first quarter due to a sharp volume decline in bakeries and a protracted strike at its snacks and treats division.
Source: Reuters/Siphiwe Sibeko
The maker of Jungle Oats and Tastic rice said headline earnings per share for continuing operations fell to 729 cents in the six months ended 31 March down from 741 cents a year earlier. Total revenue from continuing operations rose 2% to R16.8bn, driven by price inflation of 3% and partially offset by overall volume declines of 1%, the group said.Volume growth in the exports and international business was offset by a drop in volume in the domestic business, primarily attributable to milling and baking, snacks and treats as well as home and personal care.
Source: Tiger Brands
Tiger Brands said the poor performance of these businesses was compounded by challenges relating to the procurement of certain key raw materials and ingredients, as well as packaging availability and the inability to effect sufficient price increases to offset unexpected cost push.
Surge in costs
Consumer goods companies are grappling with a surge in commodities, energy, transport and labour costs, which have been compounded by the war in Ukraine. Tiger Brands is particularly exposed because of its reliance on food - where inflation is especially high.
The high level of input cost inflation resulted in gross margin compression to 29.2% from 30.6%, despite the group's accelerated cost-saving initiatives and supply chain efficiencies.
"The group's improved top line and profitability in the second quarter were insufficient to negate the poor start to the year," Tiger Brands said.