Tiger Brands boasts earnings increase

South African food and pharmaceutical group Tiger Brands on Thursday reported a 32% increase in its diluted headline earnings per share for the year to September 2005 to 975,4 cents from 737,3 cents previously.

The I-Net Bridge consensus forecast of analysts was for fully diluted headline earnings per share of 970 cents, with forecasts ranging from 929 cents to 985 cents.

The group also declared a total dividend per share for the 2005 financial year of 500 cents, up 35% from 350 cents before.

The I-Net Bridge consensus forecast was for a total dividend of 487 cents, with forecasts ranging from 465 cents to 500 cents.

The increase in earnings was a result of a combination of good volume growth, improved operating efficiencies and product innovation, Tiger Brands said.

Turning to the outlook for the 2006 financial year, Tiger Brands CEO Nick Dennis said the company expects to deliver real earnings growth, at a lower rate than that achieved for the year ended September 2005.

“While the economy remains in a growth phase, there are indications of a slowdown in consumer expenditure in the areas in which Tiger Brands operates,” Dennis said.

The I-Net Bridge consensus forecast of analysts is for Tiger Brands to produce fully diluted headline earnings per share of 1 132 cents in 2006—up 16% from the 2005 year.

Tiger Brands spokesperson Roy Smither said the group’s pharmaceuticals business will continue to show good growth in the year ahead and while there is set to be growth in the group’s food business, it is expected to slower than 2005 levels.

There is unlikely to be a dramatic decline in consumer spending on non-durable goods in the foreseeable future, he added.

Tiger Brands is satisfied about the portfolio of products and isn’t looking to divest or unbundle any of its holdings, such as Adcock Ingram for instance, Smither said.

Dennis said the improved results for 2005 were achieved, on average, with no price increases in the company’s products for the year.

“There were particularly strong performances at the operating-income level in the second six months from Bakeries, Snacks and Treats, DairyBelle and Consumer Healthcare,” Dennis said.

Revenue for the year increased by 5% to R15,374-billion from R14,692-billion.

The operating margin from continuing operations improved to 15,5% from 13,9% in the prior year, largely driven by good volume growth and improved operating efficiencies.

The fast-moving consumer-goods operation saw a 5% turnover growth, which translated to a 20% growth in operating income.

Domestic food’s operating income exceeded R1-billion, reflecting growth of 19% compared to a 5% growth in turnover.

Beacon increased its operating income by 56% on an 8% increase in turnover.

“The chocolate category enjoyed a substantially improved performance, benefiting from a high level of innovation which was well received by the market,” Dennis added.

“In the groceries category, strengthened brand equity, together with effective price management, resulted in market share gains in all key segments and contributed to a 25% increase in operating income,” he added.

The milling and baking division continued to do well and a decision was made to recommission the Randfontein bakery to meet increased demand.

The consumer health-care business increased its operating income by 28% off a 12% increase in turnover.

Ingram’s Camphor Cream and Lemon Lite recorded particularly good sales volumes in the personal-care category.

The generic-medicines category, part of the pharmaceuticals division, increased operating income by 47% on a 35% increase in turnover.

The branded-medicines business, which comprises the prescription, over-the-counter, tender and anti-retroviral categories, grew operating income by 20%.

Intense competition and the introduction of single-exit pricing, which has reduced the price of registered products to 2003 levels, resulted in the hospital-products business achieving modest growth in turnover and operating income.

Subsequent to year-end, the company expanded its interests in the hospital-products sector through the acquisition of a 74% interest in the Scientific Group.

Dennis said the company’s export operations, excluding fishing, showed an improvement with operating income increasing from R16-million to R18,1-million, reflecting better performances from Mozambique and Zambia.

The company’s fishing interests in Sea Harvest (74%) and Oceana Group (40%) were affected by poor fishing conditions, high fishing costs and the strong rand exchange rate, which adversely affected export realisations.

Tiger Brands said that despite several cost-saving and revenue-enhancing initiatives, including engine conversions to lower-cost fuel blends and the development of new products and export markets, operating income at Sea Harvest declined significantly.

However, Oceana enjoyed an improved second-half performance.—I-Net Bridge

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