Tiger expects 'modest growth'

Johannesburg - South African food group Tiger Brands said on Tuesday that it expects headline earnings per share to show modest growth in real terms.

Earlier today the group reported headline earnings per share (heps) from continuing operations of 607.1c for the six months to end-March 2009, representing an 8% increase on those achieved a year ago.

CEO Peter Matlare said the trading environment for the first half was characterised by significant raw material cost increases, high interest rates and a weakening Rand exchange rate.

"As a result of these and other factors, consumers have altered their buying patterns which have had a negative impact on volumes in many categories," he said.

Turnover from continuing operations increased by 24% to R11.15bn, with the increase particularly pronounced in the Grains division.

Matlare said strong performances compared to the first six months of the previous year were experienced in most fast moving consumer goods categories despite underlying consumer demand having weakened.

The Domestic Food division increased turnover and operating income by 23% and 30% respectively with the Grains segment recording a strong improvement in operating income of 35%.

"Maize benefited from consumers downtrading out of the rice category into more affordable staple products, resulting in an increase in demand for the Ace brand," said Matlare.

The Groceries business achieved a 31% growth in operating income off a 25% increase in turnover while Snacks & Treats achieved a growth of 10% in operating income off a modest turnover increase of 8%.

Trading conditions remained difficult in the Value Added Meat Products category where volumes have declined as consumer's trade down to more affordable meat offerings. Reduced consumer spending in the Out of Home market negatively impacted this business, particularly in the loss-making prepared meals segment which the Company has planned to exit.

The performance of Consumer Healthcare was disappointing with operating income reflecting an increase of only 3% on a 10% growth in turnover.

The Exports and International division achieved a significant improvement on the prior year, with operating income increasing by R64.4m to R155.9m.

The company's fishing interests saw profitability at Sea Harvest (74% held) improved on the prior period despite lower catches. This improved performance was driven by better product mix, a weaker Rand exchange rate and lower fuel costs.

Proportionately consolidated Oceana (45% held), which is separately listed on the JSE, reported a 59% increase in headline earnings per share for the six months ended March 2009.

By late afternoon on Tuesday, Tiger Brands were trading 2.8% up at R136.26.

- I-Net Bridge