South Africa’s Tiger Brands to focus on home market after Africa review

South African food company Tiger Brands has almost completed its strategic review and will return its focus to middle-income consumers in its home market, it said after posting a 6.3 percent rise in half-year profit.

Tiger Brands, which makes bread, breakfast cereals and energy drinks, started the review under new chief executive Lawrence MacDougall after heavy losses in Nigeria.

The company sold the bulk of its Nigerian business to Dangote Flour Mills last year and has also pulled back from East Africa as part of the review.

“The immediate priority is to rejuvenate the domestic business to deliver sustainable, profitable growth,” the company said on Thursday.

“We have refined our approach to our African strategy by exiting non-core categories in Kenya and Ethiopia.”

Tiger Brands is not planning to scale back much further after these disposals and Africa remains part of its growth strategy, MacDougall said in a call to reporters.

The company was among a number of South African businesses that ventured into the rest of the continent hoping to profit from Africa’s commodity-fueled boom and large population but have pulled back as growth has slowed.

Tiger Brands now sees the manufacturing, marketing and distribution of branded food to middle-income consumers in South Africa as its core business, accounting for 70 percent of sales.

“The previous company focus on African expansion resulted in a rather neglected South African portfolio despite this being the real core of Tiger Brands,” said Kagiso Asset Management’s associate portfolio manager Dirk van Vlaanderen.

Its domestic market offers good growth prospects, he added.

The company will also cut costs to generate significant savings over the next five years, CEO MacDougall said, adding that this is unlikely to affect employee numbers.

Tiger Brands had earlier reported Headline earnings per share of 1,036 cents for the six months to March 31, against 974.6 cents a year earlier, but warned of a tough outlook for the rest of the year.

Volumes in the domestic market slowed significantly in the second quarter and a recovery in the rest of Africa is “not imminent”, the company said.

Shares in Tiger Brands were down 1.7 percent at 392 rand by 1139 GMT, against a 0.2 decline for the benchmark JSE Top-40 index. ($1 = 12.8719 rand)

Courtesy Reuters