BRYANSTON, SOUTH AFRICA — Tiger Brands Ltd. said May 20 that first-half earnings declined 2% percent on foreign-exchange losses at its Dangote Flour Mills unit in Nigeria and profit “manipulation” in Kenya.

Earnings excluding one-time items from continuing operations dropped to R8.53 (71¢) a share in the six months through March from R8.67 a year earlier, the company said.

Operating profit for the Grains division as a whole increased by 7% to R890 million ($75.2 million).

“Particularly pleasing is the double-digit growth in operating income achieved by Maize, Pasta and Rice. During the period, the Jungle Ultra brand was launched, aimed at the fast-growing energy segment of the breakfast market,” said Peter Matlare, chief executive officer.

Dangote Flour Mills achieved turnover growth of 12% (18% in local currency), with good volume growth recorded in Flour and Pasta due to competitive pricing and enhanced product quality. The unit’s operating loss before the effects of the currency devaluation improved by 38% to R110million.

The short-term macroeconomic environment in Nigeria deteriorated during the period under review following the sharp drop in crude oil prices. This resulted in volatility in the country’s financial markets and a 25% devaluation of the Naira against the U.S. dollar. This significantly affected the performance of the group’s Nigerian businesses, in particular Dangote Flour Mills. The underlying trading performance of the businesses continues to reflect an encouraging positive trend.

“The group’s key strategic thrusts are focused on long term profitable growth and the sustainability of its market leading brands through increased brand support and product innovation,” said Matlare.

Expansion into new and existing categories, both in South Africa and the balance of the continent, remains a key focus, he said.

“Although Nigeria remains highly competitive and challenging, the Nigerian market offers an attractive source of growth,” said Matlare. “The group is pursuing a number of opportunities which could enhance the future operating income of Dangote Flour Mills, impacting positively on the outlook for the business.”

At a presentation in Johannesburg, Matlare said the unit will need to raise funds through a rights offer this year. Tiger may offer the unit a R350 million loan after an earlier grant of R600 million.

“The balance sheet is overgeared so at some point in time we’re going to have to go for a rights issue,” Matlare said. The size of the offer “will be determined by a number of things that we’re doing at the moment,” he said, without elaborating.

Matlare also said it fired the managing director of its Kenyan unit after the business overstated sales last year to achieve operational targets. Tiger has a 51% stake in Nairobi-based Haco Industries.

Geoffrey Kiarie was Haco’s managing director and has left the company, Matlare told reporters. Another executive has also left the business, while at least three others may face sanctions, he said. Tiger is considering civil charges against those responsible, Matlare said.

The unit’s operating profit declined R108 million in the first half of the year because of the “preinvoicing and manipulation of profits” in the prior year. This contributed to a 30% drop in operating profit in the international and export unit during the period, Matlare said.