23 May 2012

South Africa: Efficiencies Lift Tiger Brands H1 Earnings

Tiger Brands (TBS) says operational efficiency will remain one of the key focus areas in the short to medium term as the consumer goods company seeks to contain higher input costs across its product lines, while domestic consumer demand is expected to remain under pressure.

SA's branded food, homecare and personal care group, posted a 12.1% rise in turnover to R11.59 billion in the six months to March, while profit grew 10.1% to R1.30 billion.

"The group has initiated a number of cost improvement projects, including the consolidation of its back-end support functions and the rationalisation of certain manufacturing facilities, to maintain its cost competitiveness on shelf and to generate cost savings for reinvestment, thus enabling sustainable growth over the medium to long term," said chief executive, Peter Matlare.

The competition from local food manufacturers and private label brands, particularly in the grocery business, was also listed as a key challenge for the group as consumers sought lower cost alternatives in the current higher inflationary environment.

Tiger's exports and international businesses performed strongly in the review period, partially offsetting the slackening local consumer demand, as turnover grew organically by 27% on the back of volume growth and assisted by a weaker rand.

"We don't foresee a big shift in consumer spending patterns in the next 12-18 months, with the domestic economic conditions remaining challenging," Matlare said.

"Consumers continue to face pressure from rising inflation, including the effects of the weaker rand exchange rate, higher utility costs and rising commodity prices."

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