Dark clouds hang over South Africa’s largest food producer

The fallout of the largest listeriosis outbreak in history is still hanging over Tiger Brands, as a final court date has yet to be set, leaving the question of liability unanswered.

In a trading statement released on Wednesday, Tiger Brands provided a trading update for the 12 months through September 2024.

The food producer said it delivered a robust full-year performance, continuing to build on the turnaround reported in the first 6 months to March 2024. 

This comes after the company elected a new CEO, industry veteran Tjaart Kruger, to lead its turnaround.

The company said its topline performance was marginally ahead of the prior year, reflective of the challenging environment, while in certain instances, volume declines were reflective of the deliberate pricing correction initiatives previously implemented. 

Gross margins and naked margins are anticipated to reflect a modest recovery from FY23 levels, reflecting the various cost savings initiatives the company implemented, resulting in a marginal improvement in operating income.

“With the new operating model fully implemented, the group’s performance notably improved in the second half, with the exception of Home and Personal Care and the Deciduous Fruit business,” the company said. 

Its Home and Personal Care performance was impacted by increased competitor activity in the second half of the company’s fiscal year.

However, it said the business still delivered a credible full-year performance, excluding the impact of disposals. 

The Deciduous Fruit business performance was negatively impacted by global fruit puree pricing in the second half.

Tiger Brands said its earnings benefited further from the receipt of insurance proceeds related to the Value-added Meats business, an increase in income from associates, as well as profit on the sale of non-core brands in the first and second half.

“Management is pleased to note that the various initiatives implemented to reduce working capital have proved successful to date, with a reduction in net working capital balances, an improvement in our cash conversion and an associated reduction in net debt,” it said.

Tiger Brands said it moved into a net cash position in the second half of its financial year. 

The company advised shareholders to expect the following changes to earnings:

• Earnings per share (EPS) from total operations are expected to be between 190 cents and 224 cents higher than the 1,724.7 cents reported in FY23, representing an increase of between 11% and 13%.
• Headline earnings per share (HEPS) from total operations are expected to be between 52 cents and 87 cents higher than the 1,734.7 cents reported in FY23, representing an increase of between 3% and 5%.

Tiger Brands said the primary reason for the difference between HEPS and EPS relates to the profit on sales of non-core brands.

Tiger Brands’ results for the year ended 30 September 2024 are expected to be released on SENS on or about 4 December 2024.

Listeriosis outbreak

While Tiger Brands’ financial turnaround appears to be on track, the food producer still has a big challenge hanging over its head – South Africa’s 2017/18 listeriosis outbreak.

This outbreak was the largest recorded in history, with over 1,000 infections and 218 deaths. 

The National Institute for Communicable Diseases (NICD) linked the outbreak to contaminated ready-to-eat processed meat products from Tiger Brands’ Enterprise Foods facility in Polokwane.

Therefore, Tiger Brands is facing a class action lawsuit from individuals affected by this listeriosis outbreak. The case has been heard in the Gauteng High Court and the Supreme Court of Appeal.

The High Court initially certified the class action lawsuit, allowing the case to proceed. It has also heard various motions and applications related to the case, such as those involving subpoenas and discovery of evidence. 

However, in February 2022, the Supreme Court of Appeal heard an appeal related to subpoenas issued by Tiger Brands to obtain information from the NICD and other parties. 

The SCA ruled in Tiger Brands’ favour, allowing the company to access crucial information for the case.

In its trading statement released on Wednesday, Tiger Brands said that, since this judgement was handed down, the parties have continued with pre-trial preparations.

This has included the discovery of documents and records relevant to the class action as required in terms of the Rules of Court in order to get the matter ready for trial for the Court to determine liability. 

It said the court will allocate a trial date once all these pre-trial preparations have been fully attended to.

The company explained that, in January 2023, the company’s attorneys and the plaintiffs’ attorneys jointly approached the NICD for access to their records relevant to the listeriosis outbreak as part of an overall endeavour to expedite the resolution of the class action. 

“These records are vital to a determination of liability,” Tiger Brands said. 

In January 2024, the NICD released the so-called FASTQ files, which contained some data relating to its investigation of the listeriosis outbreak, to the plaintiffs’ attorneys. 

The files were shared with the company’s attorneys in February 2024 for review by their appointed experts. 

“The experts’ review of the data is at an advanced stage but remains ongoing,” it said.

Tiger Brands said its attorneys have engaged with the plaintiffs’ attorneys and are looking to agree on relief for qualifying individuals who have urgent medical needs, regardless of the fact that liability has not yet been determined.

“In addition, the legal representatives are engaging on measures to arrive at a speedier resolution of the class action overall,” the company said.

Tiger Brands said it is committed to working diligently to bring the listeriosis class action to a close as speedily as possible.

“The company has product liability insurance cover appropriate for a group of its size. Coverage is subject to the terms and limits of the policy,” it said.