Despite a challenging operating environment, considered investments for sustainable long-term returns and building societal value remain a priority.
Despite strong revenue growth, Tiger Brands’ performance for the six months ended 31 March 2023 was impacted by a challenging operating environment due to prolonged periods of loadshedding. High levels of inflation and lower disposable income also adversely impacted consumer behaviour in terms of volumes and basket mix.
Total revenue increased by 16% to R19.4 billion for the half-year, driven by price inflation of 17% and overall volume declines of 1%. Domestic volumes held steady and were 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.
Total revenue for the Exports and International business increased by 10% to R2.1 billion. Primarily driven by an improved performance from the Exports business where we have seen solid volume growth supported by solid in-market execution, as well as good performance by Chococam in Cameroon. A 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 which has been further impacted by the cost of operating in a constrained electricity environment. The total cost of loadshedding during the period amounted to R76 million versus R12 million for the same period last year, resulting in an incremental cost of R48 million.
As part of business continuity plans to mitigate loadshedding up to Stage 10, Tiger Brands will invest around R120-million in capital on additional backup generators for current generators, fuel and water storage facilities, water treatment and pressure improvement solutions to ensure the company continues to fulfil the food security role it plays in South Africa.
With consumer confidence continuing to decline, stubbornly high levels of food inflation and the significant increase in interest rates, consumers are becoming more price conscious and price elasticities are increasing. In addition, although a significant reduction in certain internationally priced commodities is anticipated, this is currently being offset by rand weakness, while operating costs are expected to rise significantly as a consequence of higher levels of loadshedding anticipated during the winter season.
“In this challenging environment, we will prioritise our efforts to improve efficiencies and further reduce costs to meet consumers’ need for affordability.
We will also continue to balance short-term impact with long-term growth and make considered investments for the future in our facilities, our brands, our innovation capability and our people to ensure we deliver sustainable long-term returns and build societal value,” says Noel Doyle, Chief Executive Officer, Tiger Brands.
Recently, work on rolling out solar power at an initial four Tiger Brands manufacturing sites through the conclusion of Power Purchase Agreements with third-party Independent Power Producers was completed. The initial rollout will generate sufficient power to meet at least a third of the power usage requirements per site at Tiger Brands’ Henneman Mill in the Free State, King Foods in the North West, as well as its Beverages and HPC (Home and Personal Care) manufacturing plants in Gauteng. The company also has plans in place to expand on this initial rollout over the next 18 months, with an ambition to include solar-generated power in the energy mix for all Tiger Brands manufacturing plants.
In March 2023, Tiger Brands launched a state-of-the-art multi-purpose centre dedicated to nurturing a culture of innovation in the business. The Sensorium, based at the Tiger Brands head office in Bryanston, Johannesburg, is part of a larger multi-year investment estimated at R42 million to enhance the company’s Research and Development facilities, category pilot plants at manufacturing sites and people capability to futureproof the business. New product development is focused on three key growth platforms that respond to consumer needs and macro trends. These are Economic Food Options, Health and Nutrition and Snackification.
During the first half of the year, Tiger Brands implemented Isondlo, a child nutrition programme in partnership with the Nelson Mandela Children’s Fund to address malnutrition and hunger-related deaths among vulnerable children five years old and under. At a cost of R42 million, the programme, which was announced in September 2022, supports 10 000 children aged five and under and their families, who are food insecure, with a monthly food hamper for a period of 9 months.
As South Africa’s high unemployment rate, the impact of the energy crisis and the rising cost of living place food security in communities under greater strain, Tiger Brands continued to provide support to vulnerable communities through its community food and nutrition programmes. This includes working with non-governmental organisations to provide direct food aid in the form of monthly food hampers to around 52 000 households annually as well as monthly food hampers to around 5 200 university students through the Tiger Brands Plates4Days programme. In addition, the Tiger Brands Foundation provides a daily breakfast to 67 700 school-going children across the country and in partnership with Food and Trees for Africa (FTFA) the establishment of school food gardens through the EduPlant programme to supplement national school nutrition schemes, benefits around 18 000 school-going children.
To access the unaudited group results and dividend declaration for the six months ended 31 March 2023, click here (https://www.tigerbrands-ir-digital.com/results/2023/interims-2023/index.php).
