South Africa’s largest food producer back on track

Tiger Brands’ efforts to turn the business around have paid off, as the company reported strong results for its 2024 financial year.

Tiger Brands – which owns brands like Jungle, Tastic, Doom, All Gold, Oros and KOO – released its results for the year through September 2024, which revealed a robust performance.

The food producer’s revenue grew by a modest 0.73%, while the company’s cost-cutting efforts saw its total cost of sales drop by 0.21%

Tiger Brands said its revenue growth was driven by price inflation of 7%, offset by volume declines of 6%. 

For the domestic business, volume declines were 8%, partially offset by strong growth in exports and International at 6% and 5%, respectively. 

“Notably within the domestic business, there was commendable volume growth from the food service channel, as well as the Beverages and Pasta divisions,” the company said.

The company’s gross margin increased to 28.3% from the 27.7% reported in the prior year. 

This increase was driven by continuous improvement initiatives, including value engineering savings of recipes and packaging.

The company’s profit for the year grew by 11.84% to R3.06 billion, 

The sale of non-core brands in the financial year – namely, Bio Classic, Crystal, Kair, Fiesta, Eulactol and Black Silk – and the disposal of the Status brand generated R241 million in non-operational profit for the group. 

In addition, the company received R102 million after-tax insurance proceeds from its Value-Added Meats Product business.

Tiger Brands’ earnings per share (EPS) increased by 13% to 1,942 cents, while headline EPS (HEPS) increased by 4% to 1,810 cents per share. 

The difference between HEPS and EPS relates to the profit made on the sale of non-core brands.

“With the new management team and federated operating model in place, the performance for the second half of 2024 exceeded expectations, showing credible improvement against the first half,” the company said.

“The performance trajectory was a result of agile and focused management teams empowered to make decisions, as well as various continuous improvement initiatives, such as value engineering, logistics and conversion cost savings.”

FNB analyst Zimele Mbanjwa said Tiger Brands’ top line was incrementally better than the previous year and likely better than the half-year mark, implying a notably stronger performance in the second half. 

He said the group’s efforts to tidy up its portfolio and improve its balance sheet should be beneficial over the medium term.

Tiger Brands made a significant dent in its liabilities in the 2024 financial year.

Its non-current liabilities decreased by 47.78% to R925.2 million, with long-term borrowings dropping by 74.98% to R303 million.

However, Mbanjwa said the ongoing listeriosis class action remains a major potential headwind for Tiger Brands.

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 an October trading statement, 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.

In its 2024 results, the company 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.

Tiger Brands declared a final ordinary dividend of 684 cents per share. Together with the interim dividend of 350 cents per share, this brings the total dividend for the year to 1,034 cents per share.