Tiger Brands CEO Sees Tough Second Half on Economic Weakness

Tiger Brands Ltd., South Africa’s biggest food company by market value, said the second half of this fiscal year will be difficult because of economic weakness in its home market, the continent’s biggest.

“It is going to be a tough second half,” Chief Executive Officer Peter Matlare said in a telephone interview. “We can see in terms of what people are putting in their basket and what they are not.”

Net income for the six months through March increased 2.6 percent from a year earlier to 1.32 billion rand ($135 million), the Johannesburg-based company said in a statement today. Sales advanced 21 percent to 14 billion rand.

Tiger Brands, South Africa’s biggest processor of grains and the maker of Albany bread, is expanding in Africa to reduce exposure to its domestic market, where the economy grew by 0.9 percent in the first quarter, less than the most pessimistic forecast of 15 economists in a Bloomberg survey. The company bought Dangote Flour Mills in Nigeria for about $200 million last year as acquisition opportunities dwindled at home.

Dangote Flour Mills is the “perfect fit for us,” Matlare said. “It will take us 18 months to 24 months to get the DFM business fully integrated and running” as Tiger Brands is managed.

Bakeries Volume

The company, which distributes to more than 22 African countries according to its website, said it regained volume in bakeries, rice and snacks and treats and maintained profit margins in many domestic businesses as competition intensified.

Tiger Brands gained 1 percent to 292 rand at the close of trading in Johannesburg, valuing the company at 55.9 billion rand. The shares have declined 10 percent this year, compared with a 24 percent gain for Pioneer Foods Ltd., the second-largest food company by market capitalization.

“Signals are there that conditions will be tough,” Jiten Bechoo, an equity analyst at Cape Town-based Avior Research Pty Ltd., said in a phone interview. “Tiger Brands’ performance will be closely related to the country’s economic performance.”

Operating income for the grains segment declined to 724 million rand from 794 million rand a year earlier, according to the statement. Nigeria accounted for a loss of 57 million rand.

“In the short term, volatility in soft commodity prices and foreign currency movements is likely to persist, exacerbating a tough trading environment,” Tiger Brands said.

The interim dividend for the six months rose 5.1 percent to

3.10 rand.

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