Tiger Brands Ltd. said first-half profit declined 52 percent after South Africa’s largest food company wrote down its investment in Nigeria’s Dangote Flour Mills Plc less than two years after buying the stake.
Earnings dropped to 631.9 million rand ($60 million) in the six months to March 31, from 1.29 billion rand a year earlier, the Johannesburg-based company said today in a statement. Tiger said May 15 it will impair Dangote Flour by 849 million rand, half its investment, due to underperformance.
“Given the current underperformance of DFM and the excess milling capacity that continues to increase in the Nigerian flour market, it was considered appropriate to carry out a review of the carrying value of the company’s investment in DFM,” Tiger said in the statement.
Tiger, which makes Jungle Oats and All Gold tomato sauce, bought a 63.5 percent stake in Dangote Flour Mills from Dangote Industries Ltd. in September 2012 for about $190 million, its third purchase in Nigeria. Tiger targeted acquisitions in Africa’s largest economy as it saw limited opportunities in its home market.
Tiger will seek to boost profit from the division by expanding into “value-added” products that use flour, it said. The company will pay a half-year dividend of 3.29 rand a share, an increase of 6 percent from the same period a year earlier.