/ 20 November 2013

Tiger Brands may cut jobs due to low consumer spending

Tiger Brands May Cut Jobs Due To Low Consumer Spending

Tiger Brands, South Africa’s largest food and household goods company, may consider job cuts as weaker spending in its domestic market erodes margins.

The manufacturer of Albany bread and Black Cat peanut butter cut "a couple of hundred jobs" in the past fiscal year as it closed factories, and would target a further R500-million rand in cost savings over the next three years, chief executive Peter Matlare said in an interview. Margins in South Africa declined to 14.2% from 15.9% in the 12 months ended September.

"We will always have to look at our cost base, and to the extent that it is appropriate, we would have to take heads out," Matlare said today in Johannesburg.

Spending by South Africans is under threat from an unemployment rate of 25% and economic growth that will probably slow to 2.1% this year, the lowest since the 2009 recession, according to government estimates. Consumer confidence in Africa’s largest economy dropped to a 10-year low in the third quarter as rising inflation curbed spending.

Tiger Brands’ net income fell 5.5% to R2.6-billion in the fiscal full year, the company said in a statement today. Earnings per share excluding one-time items dropped by 3.8% to R16.24, lower than the R17.16 median estimate of eight analysts surveyed by Bloomberg. Revenue advanced 19% to R27-billion.

Tiger Brands shares declined as much as 5.8% in Johannesburg, the biggest intraday loss in more than four months, and were 3.2% at R300 at 3.40pm.

Passing Costs
The company was finding it difficult to pass on rising costs to consumers, Matlare said.

"You’ve seen increasing job losses in the economy," he said. "Consumer indebtedness has increased rather than decreased. The fundamentals that would say to you consumers ought to be shooting the lights out just are not there right now.”

Dangote Flour Mills Plc of Nigeria, which Tiger Brands bought last year as part of a plan to expand outside South Africa, posted an operating loss of R389-million, according to the statement.

"As with other acquisitions made on the continent, we expect that it will take two to three years to fully align the operations to Tiger Brands’ standards and for the business to deliver acceptable returns," the company said. – Bloomberg