Tiger Brands’ load-shedding costs increased by more than 500% in the six months ended 31 March 2023, compared to the previous period.
In its latest interim results, Tiger Brands reported a strong revenue increase of 16%. However, the significant costs attached to load-shedding affected the company’s operating income and margin.
“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, further impacted by the cost of operating in a constrained electricity environment,” the company said.
Tiger Brands’ total cost to combat load-shedding amounted to R76 million for the period relative to R12 million in the corresponding period last year, resulting in incremental energy costs of R48 million.
This significant increase saw gross margins decline to 27.0% from 29.2% in 2022. Group operating income, before impairments and non-operational items, decreased by 9% to R1.4 billion.
The company’s operating income in the previous period benefited from insurance proceeds amounting to R161 million related to a product recall and the July 2021 civil unrest riots. In the current period, insurance proceeds amounted to only R20 million – an 87.58% decrease.
Therefore, excluding the impact of these proceeds, group operating income declined by 2%, and group operating margins decreased to 6.9% from 7.9%.
However, the company also saw a benefit from increased load-shedding.
The company’s Out of Home division benefited from the solid recovery in the hospitality industry and increased demand at quick-service restaurants due to load-shedding.
These factors saw the division’s revenue grow by 39% to R429 million, with volumes increasing by 20%.
Tiger Brands saw a marginal improvement of 2% in its earnings per share, and its interim dividend remained unchanged at 320 cents per share.