Tiger Brands has cut hundreds of jobs across South Africa’s food sector as annual profits tumbled amid a coronavirus-related drop in consumer spending.
The publicly listed owner of brands such as Albany Bakery and Cresta Rice released its annual results for the period to September 30 on Friday (November 20th), posting net profits of ZAR 1.03 billion (67.1 million). dollars), against 3 ZAR. 89 billion reported for last year.
A company spokesperson has confirmed CEO Noel Doyle’s comments to some media that Tiger Brands has already cut 400 employees covering all of its business activities, from operations to manufacturing and corporate office functions.
In an earnings presentation for analysts, Doyle said Covid-19 not only impacted consumer demand, but also disrupted the efficiency of Tiger Brands’ supply chain, while the company was also facing disruptions at its own manufacturing facilities due to employee infections.
Doyle took over from Lawrence MacDougall as CEO of Tiger Brands earlier this year and is continuing an asset offloading program. Over the summer, he completed the sale of the company’s value-added meat (VAMP) business, including the Enterprise Foods subsidiary and plants, to Molare Proprietary and Silver Blade Abattoir Proprietary, a wholly-owned subsidiary of local poultry processor Country Bird Holdings.
Tiger Brands is also looking for a buyer for its canned fruit business – Deciduous Fruits – and is looking to sell the “end” of its personal care operations.
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In 2019, the company also closed its loss-making Deli Foods business in Nigeria and in the same year shed part of its stake in local seafood company Oceana Group, a stake it wants to sell. entirely.
Tiger Brands reported declines across most of its metrics, including a slump in profit from continuing operations to ZAR 1.49 billion from ZAR 4.36 billion based on revenue of ZAR 29.8 billion, from ZAR 28.6 billion a year earlier.
Operating profit fell 18% to ZAR 2.6 billion.
“Results for the year were disappointing, reflecting the company’s struggles to maintain margins in an already challenging consumer environment prior to the onset of the Covid-19 pandemic,” Doyle told analysts. “A decline in volumes in some categories, coupled with the inability to fully recover a significant surge in raw material costs [inflation]however, put gross margins under pressure and led to a decline in the group’s operating profit.
Tiger Brands said appetite for bread, pasta, oat-based breakfast products and wheat increased in the second half of the year, but falling consumer demand persisted for snacks, candies, baby products and beverages, as well as declining sales in the non-domestic sector. No mention was made regarding the performance of the private label part of the business.
Looking ahead, Doyle said the “current significant economic downturn” in South Africa will persist into next year as Covid-19 has put many people out of work, while the rand remains unstable.
“Anticipated volatility in the rand and rising levels of unemployment will negatively impact both the supply and demand dynamics of our business,” he said. “Continued pressure on consumer disposable income underscores the need to focus more on value propositions as well as cost reduction initiatives.”
Doyle also alluded to the expected benefits of recent asset disposals “as the successful execution of key strategic initiatives should position the group favorably to reverse the downward trend in profitability from continuing operations.”
Last week, another South African-based food maker, RFG Holdings, announced it was consolidating manufacturing with plans to close a pie and bakery factory by the end of the month in the difficult business conditions caused by the pandemic.