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Tiger Brands May Cut Jobs as It Targets Cost Savings

Nov. 20 (Bloomberg) -- Tiger Brands Ltd., South Africa’s largest food and household goods company, may consider job cuts as weaker spending in its domestic market erodes margins.

The manufacturer of Albany bread and Black Cat peanut butter cut “a couple of hundred jobs” in the past fiscal year as it closed factories, and would target a further 500 million rand ($49.4 million) in cost savings over the next three years, Chief Executive Office Peter Matlare said in an interview. Margins in South Africa declined to 14.2 percent from 15.9 percent in the 12 months ended September.

“We will always have to look at our cost base, and to the extent that it is appropriate, we would have to take heads out,” Matlare said today in Johannesburg.

Spending by South Africans is under threat from an unemployment rate of 25 percent and economic growth that will probably slow to 2.1 percent this year, the lowest since the 2009 recession, according to government estimates. Consumer confidence in Africa’s largest economy dropped to a 10-year low in the third quarter as rising inflation curbed spending.

Tiger Brands’ net income fell 5.5 percent to 2.6 billion rand in the fiscal full year, the company said in a statement today. Earnings per share excluding one-time items dropped by 3.8 percent to 16.24 rand, lower than the 17.16 rand median estimate of eight analysts surveyed by Bloomberg. Revenue advanced 19 percent to 27 billion rand.

Tiger Brands declined as much as 5.8 percent in Johannesburg, the biggest intraday loss in more than four months, and was 3.2 percent lower at 300 rand at 3:40 p.m.

Passing Costs

The company was finding it difficult to pass on rising costs to consumers, Matlare said.

“You’ve seen increasing job losses in the economy,” he said. “Consumer indebtedness has increased rather than decreased. The fundamentals that would say to you consumers ought to be shooting the lights out just are not there right now.”

Dangote Flour Mills Plc of Nigeria, which Tiger Brands bought last year as part of a plan to expand outside South Africa, posted an operating loss of 389 million rand, according to the statement.

“As with other acquisitions made on the continent, we expect that it will take two to three years to fully align the operations to Tiger Brands’ standards and for the business to deliver acceptable returns,” the company said.

To contact the reporter on this story: Andre Janse van Vuuren in Johannesburg at ajansevanvuu@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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