Tiger Brands Profit Drops in Wake of Listeriosis Outbreak

(Bloomberg) -- Tiger Brands Ltd. said first-half profit fell as Africa’s biggest publicly traded packaged-food company battles to overcome weak economic growth and the aftermath of a deadly outbreak of listeriosis.

• Earnings before one-time items dropped 12% to 7.59 rand a share in the six months through to March. While the interim dividend declined, the Johannesburg-based company declared a special payout of 3.06 rand a share after it spun-off its stake in its fishing business Oceana Group Ltd.
• The unbundling of Oceana will also lift full-year earnings per share including one-off gains by more than 20% for the 12 months through September compared with a year earlier, Tiger Brands said in a statement on Wednesday.

Key Insights

• While a deadly outbreak of listeriosis forced Tiger Brands to temporarily close two factories last year, the crisis seems to be over. Tiger Brands will defend a class action suit filed in a South African court over the listeriosis outbreak, the company said, adding that its liability insurance doesn’t cover punitive damages.
• Earnings are still hamstrung by weak economic growth in South Africa that’s eroding consumer demand for Tiger’s products, which include Tastic rice and Albany bread. While sales volumes rose in South Africa, low price inflation hurt margins, the company said. This was further compounded by a decline in revenue from export markets.
• Investors will be studying the financial statements closely after smaller rival Pioneer Foods warned of rising costs and a depressed economy. That triggered an 11% share-price drop at the Cape Town-based maker of Ceres fruit juices and Weet-Bix breakfast cereal.

Market Reaction

• Tiger Brands shares rose 1.4% to 233.22 rand as of 9:16 a.m. in Johannesburg, following six consecutive days of gains. The stock is down 7.9% this year, compared with a 10% fall on the FTSE/JSE Africa Food Producers Index.

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• Tiger Brands first-earnings statement and outlook statement.

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