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Johannesburg - Tiger Brands [JSE:TBS] fell the most in more than a month, wiping out this year’s gains after the largest South African food producer said higher grain prices and slowing consumer demand are weighing on profit.
The warning from the Johannesburg-based maker of Albany bread and Black Cat peanut butter comes as a drought causes the price of the country's key staples such as white maize to more than double since the beginning of last year, and wheat to rise 18%.
These increases have been exacerbated by a 28% plunge of the rand’s value against the dollar over the period, fuelling the price of imports in a country where more than one in four is unemployed.
“With consumers under considerable financial pressure, the impact of the depreciating rand and rising soft commodity prices was only partially offset by price increases,” Tiger Brands said in a statement on Tuesday. The company achieved sales growth of 7% during the four months to end-January, compared with the year-earlier period, it said.
The stock dropped 5.7% to R300 by the 17:00 close of the JSE, close to a decline this year of 5.2%. The securities lost 14% in 2015.
The company will pass on some cost increases to consumers, Noel Doyle, Tiger Brands’ acting chief executive officer, said during a conference call. It expects inflation to accelerate in the second half of the year, he said.
“We’re going to do a particular delicate balancing act over the next six to eight months,” he said. “If we stuck to market share at all costs, that cost could be very significant.”
