Investors dump Tiger Brands after profit warning

Tiger Brands share price slumped more than 10% after the food, home and personal care products maker warned that annual profits would be up to 37% lower than the previous year.

Tiger Brands [JSE:TBS] said in a trading statement on Thursday that its results for the year to end-September 2018 will differ by at least 20% from the prior comparative period due to continuing cost pressures and the impact of listeriosis.

By 12:13 on the JSE, Tiger Brands shares were changing hands at R310.01 (-5.38%) a piece after reaching an intra-day low of R295.55 shortly after the news.

According to Tiger Brands, South Africa's biggest food producer, significant cost increases were derived from the adverse movement in the rand, fuel price increases, labour settlements and higher administered costs, which have yet to be recovered in selling price increases.

There was also a significant impact due to the recall of products and suspension of operations involving certain of the company’s value-added meats processing facilities.

Tiger Brands was hard-hit when the source of a deadly listeriosis outbreak in March was traced to its Enterprise Foods factory in Polokwane.

Health Minister Aaron Motsoaledi announced in March that the outbreak of listeriosis had been traced to an Enterprise Foods facility.

"We can now conclude scientifically that the source of the present outbreak is the Enterprise Food production facility located in Polokwane," he said at the time.

Tiger Brands on Thursday also pointed out to shareholders that it had previously reported that Haco Tiger Brands was disposed of with effect from 14 December 2017. As a result, it has been accounted for as a discontinued operation for the period up to the date of its disposal.

The board of directors of Tiger Brands announced in February 2017 that it decided to dispose of its 51% stake in its Kenyan business, Haco Tiger Brands, which it had acquired in 2008.

Tiger Brands thus advised shareholders that it expects earnings per share (EPS) from total operations (including Haco) to be between R4.21 and R7.09 lower or between 22% and 37% lower than the R19.15 reported for the comparative period.

Headline earnings per share (HEPS) from total operations (including Haco) are expected to be between R4.75 and R8.00 lower or between 22% and 37% lower than the R21.61 reported for the comparative period.

Excluding Haco, EPS from continuing operations are expected to be between R4.07 and R6.84 cents lower or between 22% and 37% lower than the R18.48 reported for the comparative period.

HEPS from continuing operations (excluding Haco) are expected to be between R4.74 and R7.97 lower or between 22% and 37% lower than the R21.55 reported for the comparative period.

In a separate announcement on Thursday, Tiger Brands said that Swazi Tshabalala has stepped down as independent non-executive director of the company on 15 August 2018. This follows her appointment as vice president of finance and chief financial officer for the African Development Bank.

The board has appointed Gail Klintworth as independent non-executive director with effect from 16 August 2018.

Tiger Brands results is expected to be released on or about 22 November 2018.

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