Tiger Brands hammered

Tiger Brands’ share price fell by over 15% on Tuesday after releasing disappointing results on the back of increased costs.

The food giant increased revenue by 16% from R16.8 billion to R19.4 billion. However, its operating profit decreased by 9.2%, while its net profit decreased by 2.1%.

During the group’s results webinar, management said a weak consumer environment is the largest contributor to the company’s poor results.

Tiger Brands chief growth officer Thushen Govender explained that the group had experienced a general decrease in consumer activity.

The company saw consumers moving out of certain product categories especially. Baby products were hard hit, with consumers rather buying general products than baby-specific products.

Investors did not react well to this news, especially when the group shared their dim outlook for the future.

CEO Noel Doyle said that the group doesn’t expect the trading environment to improve soon and expects consumer spending to worsen.

He said that the past 12 to 18 months had posed some of the most challenging conditions the group has ever traded in.

The group expects conditions to worsen in the short term with higher interest rates, food shortages, and increased load-shedding.

Doyle added that Tiger Brands would struggle to achieve the same results seen during the 2022 financial year.

Load-shedding also continues to pose significant constraints to the company. Doyle said they lose R250,000 per day for each stage of load-shedding it experiences.

He explained that load-shedding expenses are difficult to recoup as these costs can only be raised with a lagging effect.

Load-shedding expenses in a specific period tend to only be raised on prices for goods in the following period.

Tiger Brand’s P/E ratio has decreased to 9 times earnings since the result was released, a similar level last seen in 2020. 

Tiger Brands share price

Tiger Brands P/E ratio