Acquisitions that were recently concluded outside South Africa would assist Tiger Brands to offset the challenging domestic market but it would not mitigate the full impact yet, Peter Matlare, the chief executive, said yesterday.
Yesterday, the listed consumer goods firm reported its results for the six months to March in which it said the modest 1 percent rise in turnover to R10.4 billion was influenced by price deflation in certain food commodities, the impact of promotional discounting in some categories to restore volume growth, and tough trading conditions.
The company said it expected trading conditions to remain challenging for the remainder of the year.
“Although (the international) acquisitions will in the first year contribute to turnover, it will not offset the total impact, not until our international business is in excess of 20 percent at turnover level,” he said.
“It is not just about acquisition, its also about bedding it down and integrating. The work is still enormous.”
Tiger Brands acquired 100 percent of Nigerian biscuit manufacturing and marketing firm Deli Foods with effect from April for R275.8 million.
It also concluded a transaction with the East African Group of Companies of Ethiopia which led to the formation of a new food and home and personal care joint venture that will operate in the Ethiopian market.
Tiger Brands invested R112.8m and owns 51 percent of the new company.
The two firms are expected to generate a combined turnover of about R500m in the first full year.
The company also bought a 49 percent stake in the food and beverage operations of UAC of Nigeria for R417.2m. Matlare said Tiger Brands was still looking for more acquisitions in emerging markets, especially in Africa. The company has operations in Kenya (Haco) and Cameroon (Chococam).
Locally, Tiger Brands has received an unconditional approval from the Competition Tribunal to purchase Davita, a manufacturer and exporter of powdered seasonings and beverage products that has a presence in 28 countries across Africa and the Middle East.
After excluding the impact of a once-off charge for the second phase of the black economic empowerment transaction, headline earnings a share fell by 2 percent to R7.479. Operating income declined by 3 percent to R1.5bn.
Matlare said the first six months had been challenging and some areas were tougher than expected.
Daniel Isaacs, an analyst at 36ONE Asset Management, said the results were what was expected though one or two divisions disappointed.
Isaacs said what could assist second-half growth was a top-line increase in the milling and baking division due to volume increases. He said one of the reasons for growth in volumes could be as a result of a major competitor recently increasing product prices, and this would increase the relative attractiveness of Tiger Brands products.
“A favourable move in the currency would also help to stem the losses experienced in Langeberg & Ashton Foods,” added Isaacs.
Tiger Brands shares lost 0.79 percent to R187.03. - Business Report