Tiger Brands said trading conditions in Nigeria remain challenging and DFM has continued to sustain operating losses, primarily because of on-going top-line pressures.

 

“The turnaround in the performance of DFM over the medium terms remains a key objective,” said Peter Matlare, Group Chief Executive Officer. “We are currently implementing short to medium action plans which include reducing DFM’s fixed cost base, mothballing of mills where appropriate and rebuilding the brand equity of its product basket. The successful implementation of these initiatives will improve the overall outlook for the business in the longer term”.

 

Given the current underperformance of DFM and the excess milling capacity that continues to increase in

the Nigerian flour market, the board has impaired, in full, the carrying value of the goodwill and intangible

assets relating to the company’s investment in DFM. The value of this impairment amounts to R849 million.

Excluding this impairment, earnings per share from continuing operations increased by 9% to 877 cents per

share, while headline earnings per share increased by 7% to 856 cents, the company said.

 

Turnover from continuing operations, which amounted to R14.9 billion, was 11% higher than the corresponding figure in the prior year. Turnover for the domestic businesses was R11.2 billion, an improvement of 8%. Domestic sales volumes increased by 4%, with selling price increases generally in line with or below inflation.

 

The Export and International businesses, including Nigeria, grew turnover by 20% to 3.7 billion. Sales volumes were strong, but this was offset by pressure on volumes at DFM (Dangote Flour Mills) primarily due to intense competitor activities.

 

The Group declared an interim dividend of 329 cents per share for the half year ended March 31, 2013, an

increase of 6% compared to the 2013 interim dividend of 310 cents per share.

 

“The Tiger group is making steady progress in implementing key strategic initiatives aimed at regaining

market shares and further strengthening its core brands,” said Matlare.

 

The group’s overall gross margin declined by 0.9% to 30.9%, negatively influenced by the inflationary effects

of the weak rand on input costs. The operating margin declined by 0.2% to 11.5%.

 

“Tiger Brands experienced significant cost inflation in the first half, partly due to the rapid decline in the rand

exchange rate. This was not fully recovered in pricing and negatively impacted on our margins, but we are

expecting this margin erosion to ease over the balance of the year as pricing is adjusted to partially absorb

the higher costs,” said Matlare. “However, the group will continue to partially absorb cost increases in a

number of categories, mitigating the impact where possible through cost reduction initiatives and improved

efficiencies”.

 

Operating income for the period is R1.7 billion, 9% higher than in the corresponding prior period. The Grains division achieved solid growth, especially within the MillBake and the Breakfast categories.