A poor start to the year, specifically a strike at its snacks and treats division and a decline in volume at its bakeries has resulted in a decrease in food producer Tiger Brands’ earnings.
In its results for the six months ended 31 March 2022, the Johannesburg headquartered group said its headline earnings per share fell by 2% to 729 cents per share, from 721 in 2021.
Group operating income in the period decreased by 5% to R1.5 billion. That operating income includes insurance proceeds of R17 million in respect of last years wide recall of some KOO and Hugo's canned vegetable products, and R144 million due to the July unrest.
The Albany brand owner said its performance was impacted by volumes declining in its bakeries division. The group which also produces snacks and treats the under its Beacon brand, said a protracted strike at the division also played a role.
"The poor performance of these businesses was compounded by challenges relating to the procurement of certain key raw materials and ingredients, as well as packaging availability and the inability to effect sufficient price increases to offset unexpected cost push," Tiger Brands said.
"The group’s improved top line and profitability in the second quarter was insufficient to negate the poor start to the year."
The group’s revenue increased by 2% to R16.8 billion, due to price inflation of 3% but was partially offset by volume declines of 1% across the business.
"The volume declines were somewhat offset by a strong volume recovery in Out of Home and good performances in rice, beverages and groceries," said Tiger Brands.
Cost saving initiatives and supply chain efficiencies was not enough to cushion Tiger Brands against high input cost inflation, leaving the group with gross margin compression of 29.2% from 30.6% in the 2021 interim period.
Despite the tough six months, Tiger Brands declared an interim dividend of 320 cents per share, which was in line with the 2021 interim dividend.