Tiger Brands’ full-year results have been impacted by a slower than anticipated recovery in the part of the business that includes Enterprise Foods.
The results cover the year ended Sept. 30, 2019. Enterprise Foods is in the Value Added Meat Products (VAMP) business of Tiger Brands.
Although there was a steady improvement in VAMP’s performance since re-opening the manufacturing facilities, the second half performance was below expectations. As a result, full-year revenue declined 39 percent to 654 million South African Rand (U.S. $45 million), while an operating loss of R547 million ($37.2 million) was incurred compared to R252 million ($17.1 million) in 2018.
The after-tax trading loss for VAMP was R394 million ($27 million) this year versus 181 million Rand ($12.3 million) last year.
Other factors for the decline included ongoing margin compression across the grains portfolio and tough trading conditions in primary export markets.
The possible sale of segment and class action update
The firm said, “significant progress” had been made in terms of optimizing the portfolio including a decision on VAMP.
“With respect to the potential disposal of VAMP, the formal due diligence process is underway and further updates will be given as key milestones are reached,” said a statement.
The company held a review in 2017 looking at the possibility of selling its VAMP business. However, the outbreak and closure of manufacturing facilities delayed the evaluation.
The listeriosis outbreak began at the start of 2017 and was declared over in September 2018 with 1,065 confirmed cases and 218 deaths. It was traced in March 2018 to a ready-to-eat processed meat product called polony made at a plant in Polokwane run by Enterprise Foods, which is owned by Tiger Brands.
When the business re-opened at the beginning of the 2019 financial year, a review was started.
A Tiger Brands stock market statement earlier this month said the business was “not an ideal fit within its portfolio” and that consideration should be given to exiting the category. It confirmed there had been “several indicative offers” and a formal due diligence process started ahead of a final decision.
Excluding VAMP, Tiger Brands’ operating income before impairments and abnormal items decreased by 11 percent to R3.2 billion ($220 million). The impairment charge featured an R96 million ($6.6 million) write-down in respect of VAMP’s property, plant, and equipment due to the declining profits in this business during the period.
In an update on the listeriosis class action and the summons received in April, Tiger Brands said it filed a plea in early August.
“Tiger Brands will continue to conduct its defense in a responsible manner while remaining committed to the matter being resolved as soon as possible,” according to a statement.
Richard Spoor Attorneys are representing more than 1,000 people affected by the listeriosis outbreak. The Seattle firm of Marler Clark LLP is serving as a consultant for the case attorneys.
The first stage of the process deals with liability. Damages would be handled at a second stage if the court finds the firm liable. A hearing could happen by mid-to-late 2020.
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