Tiger Brands’ Revenue Surges, but Earnings Struggle Amidst Market Challenges

Tiger Brands
  • Tiger Brands reports strong revenue growth of 16% to R19.4 billion for the six months ending March 31, 2023.
  • Higher operating costs and challenging market conditions lead to a 9% decline in group operating income.
  • Despite the earnings challenges, the company maintains an interim dividend of 320 cents per share.

Tiger Brands Limited has released its unaudited group results and dividend declaration for the six months ended March 31, 2023. Despite achieving strong revenue growth during this period, the company faced higher operating costs and challenging market conditions that impacted its earnings.

Tiger Brands experienced a notable increase in revenue, which rose by 16% to R19.4 billion, driven by a 17% price inflation. However, overall volume declines of 1% negatively affected the company’s performance. The challenging operating environment, characterized by prolonged periods of loadshedding (scheduled power outages), high levels of inflation, and lower disposable income, had an adverse effect on consumer behavior in terms of volumes and product preferences.

Although Tiger Brands achieved positive revenue growth, the company’s group operating income declined by 9% to R1.4 billion, resulting in a decrease in the group operating margin from 8.9% to 7.0%. Gross margins also declined from 29.2% to 27.0% compared to the previous year, primarily due to significant input cost inflation and the expenses associated with operating in a constrained electricity environment.

The earnings per share (EPS) for Tiger Brands increased by 2% to 749 cents per share, while headline earnings per share (HEPS) saw a marginal increase to 731 cents per share. However, these gains were offset by lower insurance proceeds received relative to the prior year, as well as higher financing costs.

The performance of Tiger Brands varied across its product categories. While volumes remained steady in the Domestic Business segment, the company witnessed recoveries in Bakeries, Snacks & Treats, Personal Care, Sorghum Breakfast, Rice, Beverages, and Out of Home segments. However, there were volume declines in flour sales to retail and wholesale customers, Sorghum Beverages, Groceries, Baby products, and a slight decline in Home Care. Although export volumes showed a strong recovery, Deciduous Fruit volumes experienced a significant decline.

Looking ahead, Tiger Brands acknowledges the decline in consumer confidence, high levels of food inflation, and an increase in interest rates, which have made consumers more price-conscious and affected price elasticities. The company plans to prioritize efficiency improvements and cost reduction initiatives to meet the consumers’ need for affordability. Additionally, Tiger Brands will focus on enhancing its penetration and performance in the general trade sector while sustaining positive share gains in modern trade.

Despite the prevailing challenges, Tiger Brands remains committed to balancing short-term impacts with long-term growth without compromising the sustainability of its business. The company will continue to invest in its facilities, brands, innovation, digital capabilities, and its workforce.

Tiger Brands has declared an unchanged interim dividend of 320 cents per share for the six-month period, in line with the previous year’s dividend. Shareholders are advised to take note of the relevant dates for the dividend payment.

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