Tiger Brands upgraded its full-year earnings guidance on Wednesday, sending its share price up as much as 7.8% in early trade, boosted by above-forecast final trading numbers and favourable foreign currency swings.
In a trading update, SA’s largest food producer said headline earnings per share (Heps), the primary measure of profit that excludes certain one-off items, is expected to be 48%-53% higher in the year to the end of September. The September forecast was a 35%-45% increase.
The Johannesburg-based company, whose brands include All Gold, Koo, Albany, Beacon and Oros, trades in multiple currencies as it not only has a growing footprint in Africa but its export business brings 154 of its brands to consumers in 55 countries around the world.
Amid a high inflationary environment, Tiger Brands said in September it was also able to pass on the increasing costs of food products to its customers.
Gryphon Asset Management analyst Casparus Treurnicht warned that as much as food producers and retailers were under immense pressure from input costs, consumers were also buckling under the rising cost of living with little relief on the horizon.
“Going forward, the question is how bad the consumer is going to do. They are under pressure: interest rates are still on the rise and inflation has a long way to go to get back to normal,” Treurnicht said.
The R36bn company grappled with another product recall earlier this year when it had to pull its Purity Essentials baby powder from the market after it was discovered that the product may have been contaminated with traces of asbestos.
At the time, however, the company assured investors that the recall would only cost it R20m-R25m.
The company is still involved in a class-action lawsuit related to a listeria outbreak traced to products from its meat-processing plant in 2018 which left more than 200 people dead.
Treurnicht said that while Tiger Brands did have some legacy issues that were depressing its valuation and some items fell away from the previous financial results, Wednesday’s figures were good numbers “for this food company trading on a sub-20 price to earnings given the current environment”.
Regarding the economy as a whole he said: “We are probably going to see more weakness.”
Meanwhile, the future of the group’s fruit canning factory in the Cape winelands, upon which about 250 permanent and 4,300 seasonal jobs are reliant, still hangs in the balance after the end of this season in May.
Having struggled for two years to find a buyer for the business and nearly shutting it down earlier this year, Tiger Brands announced it would keep operations going until next May after a compact was agreed on with labour, employees of Langeberg & Ashton Foods, and the Canning Fruit Producers Association to facilitate the talks between itself and potential buyers. Tiger Brands is yet to name the potential buyers.
The annual results of the 102-year-old company are expected to be released on December 2.
Tiger Brands’ shares ended the day nearly 3% higher at R197.19, outpacing the all-share index which fell 0.54%.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.