Tiger Brands 6 month numbers

22-MAY-15

As mentioned earlier in the week, Tiger Brands released their 6 month interim numbers on Wednesday. It is a storey of their local division that has done well and the international businesses pulling the group down.

On the local front they increased their turnover by 8% (6% inflation), their margins grew very slightly from 13.9% to 14%, the volume of goods sold was up 2% and they increased operating income by 9%. These are solid numbers, they showed growth in all the numbers that counted and are inline with their competitors growth numbers.

Moving on to the international side of things, where all the pain was felt. In Kenya, their Haco operation had fudged the numbers in the last reporting period resulting in R108 million worth of costs in this period. Tiger say they have taken corrective action and that they still back the management team there.

A more well known problem is their operation in Nigeria, Dangote Flower Mills (DFM). They made an operating loss of R128 million for the half year, which is 29% lower than the same period last year. Add to that another R134 million loss arising from the sharp devaluation of the Naira, management expects a further devaluation of the currency over the medium term. Part of the problems mentioned in DFM, was sending South Africans initially to run a company in a country they didn't fully understand. There has been a big push now to get people into DFM who understand Nigeria better, which is a positive move. Another positive number is that they grew their volumes by 16% for the half year. When will the numbers be in the green? I don't think anyone knows but it wont be in the near term.

I don't see the share price outperforming over the short term, there needs to be a sustained turnaround in the international business first. I would still be buying the stock though, their stable of brands is quality and runs deep, which gives them a 'moat' around their business and gives them a platform to continue growing as the middle class grows.