Where did it go wrong?

Investment Correspondent, Justin Row Roberts

South Africa’s largest Food producer Tiger Brands has long been referred to as a quality quality company owned by many of the top local asset managers. Tiger Brands has labels such as Jungle Oats, Albany and All Gold, and is considered best-in-class in this area, even though things like AVI have a better track record. The defensive nature of the industry is undoubtedly a plus for risk-averse investors. However, dire capital allocation and product quality issues have destroyed shareholder value over the last five years. Of further concern to investors is that inflationary pressures as a result of unprecedented monetary easing are putting significant pressure on input costs. The brand is preferred by consumers, but it is not always easy to convey inflationary pressure to consumers. Analysts are becoming more and more concerned that inflation is not “temporary” in nature.this means inflation It stays higher for longer and is negative for margins and returns. Another concern, above many others.

Comparing the Tiger Brands 2021 numbers with the 2016 numbers shows a dark situation. Revenues will be slightly lower, but even more surprisingly, the company’s key performance indicator, headline earnings per share, has declined by about 50%. Tiger Brands has spun off 42% of Oceana’s stake during the review period, but hasn’t been able to reach the top line in five years, so a lot of things need to be considered. But where did that go wrong?

In 2011 and 2021, management decided to embark on the African growth story. Many of the JSE management teams in various industries had similar ideas. Nigeria was an attractive jurisdiction with the country’s high growth rate. In 2011, the Tiger brand purchased a 49% stake in UAC Foods and in 2012 a 65.7% stake in Dangot Industries.Both NigeriaBase business. Many JSE-listed counters have lost money in Africa, and the Tiger brand is no exception. After that, the shares of both businesses were sold. During this time, management has focused on growth, the brand has steadily declined, and has continued to lose market share over the past few years.

The outbreak of listeriosis in 2018 has caused significant financial and reputational damage to food producers. What was thought to be an idiosyncratic event was clearly not. Just a few weeks ago, the company announced that it had another product quality scandal. After millions of canned vegetable products have been recalled and listeriosis has occurred, the company has already been involved in a lawsuit and is facing another hurdle.

When will the tide change?

Tiger brand media release:

The improvement in Tiger Brands’ performance for the year ended September 30, 2021 was offset by the cost of product recalls and public anxiety.

Outstanding features *

⋅ Gross revenue increased 4% to Ran 31 billion

⋅ Product recalls and revenues excluding public unrest increased 5% to Rand 31.2 billion

⋅ Group operating income ** decreased 10% to R22.2 billion

⋅ Group operating profit **, excluding product recalls and public concerns, increased 20% to R3 billion

⋅ Group operating margin ** dropped from 8.3% to 7.2%

⋅ The Group’s operating margin **, excluding product recalls and public concerns, increased from 8.3% to 9.5%.

⋅ EPS increased 21% to 1,070 cents per share

⋅ HEPS decreased 6% to 1127 cents per share

⋅ Total dividend increased 23% to 826cps

* From Continuing Business – As in the previous year, value-added meat products were treated as discontinued business ** Before impairment and non-operational items


This year, Tiger Brands has joined a select group of South African companies celebrating their 100th anniversary. Since starting as a small family-owned company in Newtown, Johannesburg, the company has become Africa’s largest listed manufacturer of FMCG, a trusted brand that has formed part of all South African shopping carts. .. The past few years have shown particularly high levels of variability and uncertainty, with rapidly changing production and consumption patterns, increasing social, economic and environmental pressures, all of which are Covid-19 pandemics. Deteriorated by, our lifespan is the resilience of the company, the inherent strength of our brand, and the quality of our people.

Inspired by our strong history, our strategic priorities aim to improve the performance of our core portfolio while positioning us for sustainable long-term growth.

The Tiger brand’s performance for the year ended September 30, 2021 was offset by costs associated with product recalls and public anxiety in July 2021 and improved underlying performance from its core business. Reflects steady progress on strategic priorities by. The total amount is 732 million Rants (before tax).

Amortization of shares (Rant 85 million) and product recalls (Rant 308 million) related to the civil war are accounted for through cost of sales. Refunds to customers related to product recalls are accounted for as a decrease in revenue, and other recall-related costs are accounted for through the relevant expense function in the income statement.

With respect to the Group’s underlying performance, the year can be characterized as a two and a half year year, with strong performance in the first half, mainly driven by strong first quarter, but top-line growth in the second half. It was partially offset by the slowdown. Despite the revenue challenges, the cost reduction and efficiency initiatives have been maintained, providing positive operating leverage throughout the year.

Total revenue from continuing operations (before product recalls and public unrest) increased by 5%, supported by 7% price inflation, but was partially due to a 2% decrease in overall sales volume. It was offset. Operating profit from continuing operations ** fell from R22.5 billion in the previous year to Ron 2.2 billion as a result of costs associated with product recalls and public unrest. Gross profit margin and operating margin fell to 28.5% (2020: 30.1%) and 7.2% (2020: 8.3%), respectively. In addition, rising selling prices did not fully recover the high levels of agricultural cost increases, putting pressure on bare margins. However, this was offset by steady improvements in manufacturing efficiency, with overall gross profit (excluding product recalls and public concerns) slightly improving from 30.1% in the previous year to 30.3%. Operating profit 0F ** (excluding product recalls and public concerns) increased 20% to R3 billion.

Profit per share (EPS) from continuing operations increased 21% to 1,070 cents (2020: 886 cents), and headline earnings per share (HEPS) from continuing operations decreased 6% to 1127 cents (2020: 886 cents). 2020: 1196 cents). ..

EPS from the total business increased 87% to 1142 cents (2020: 612 cents) and HEPS from the total business increased 20% to 1 127 cents (2020: 940 cents).

The Group’s statement of financial position for the fiscal years ended September 30, 2020 and September 30, 2019 is IFRS 15 by offsetting some of the Group’s rebate liabilities to accounts receivable and other receivables. It has been modified to better reflect the requirements of. In addition, there was an amended restatement in the income statement for the fiscal year ended September 30, 2020 in connection with the disclosure of non-operating items to better reflect the labeling requirements of IAS 1. It ended on September 30, 2020.

Independent Auditor Report

Ernst & Young Inc., an independent auditor of Tiger Brands Limited, audited Tiger Brands Limited’s consolidated financial statements for which summarized consolidated results were derived. The auditor expressed an unrevised opinion on the consolidated financial statements. Consolidated financial statements and audit reports, including key audit items, are available on our website at

Board of Directors Committee Duties

Shareholders will be referred to the Company’s Audited Group Performance and Dividend Declaration for the fiscal year ending September 30, 2021.

In addition, shareholders will be notified of the appointment of the following committees:

• After Ian Burton resigned from the Board of Directors in June 2021, Geraldine Fraser Moreketti will be appointed Chairman of the Investment Committee and will take effect on November 19, 2021.

• From January 2, 2022, after Mr. Mayama Kanzi retires from December 31, 2021, Mr. Emama Silwane will be appointed chairman of the Social Ethics and Transformation Committee.

• After Mark Baumann retires at the company’s annual shareholders meeting on February 16, 2022, Donald Wilson will be appointed chairman of the Compensation Committee from February 17, 2022.

Declaration of final dividend

The Board of Directors has declared a final ordinary dividend of 506 cents per share for the fiscal year ending September 30, 2021. This brings the total annual dividend to 826 cents, combined with an interim dividend of 320 cents per share. Given the company’s outstanding balance sheet and strong cash-generating capacity, it was decided to determine this year’s total dividend based on the company’s adjusted headline revenues. As a result, HEPS has been adjusted to rule out the effects of product recalls and public anxiety that occurred in July this year. Therefore, after the above adjustments, our 1.75x dividend policy has been applied to HEPS.

The following additional information is disclosed in accordance with paragraphs 11.17 (a) (i) to (x) and 11.17 (c) of the JSE listing requirements.

• Normal final dividend is declared from the income reserve

• From February 22, 2017, the local dividend tax rate will be 20% (20%).

• Shareholders exempt from dividend tax will be paid a total final dividend of 506.0000 cents per common share.

• Shareholders subject to dividend tax will be paid a final dividend of 404.80000 cents per common share.

• Tiger Brands issues 189 818 926 common stock, including 10 326 758 treasury stock.

• The income tax reference number for Tiger Brands Limited is 9325/110/71/7.

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Where did it go wrong?

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