Sort­ing its head from its tail

Finweek English Edition - - Companies & Markets - SHAUN HAR­RIS

IT’S A LIT­TLE HARD to get a han­dle on ex­actly what Tiger Brands is try­ing to do. In­ten­tions un­der new CEO Peter Mat­lare seem good but the strat­egy seems, well, con­fused. It wants to get rid of Ad­cock In­gram, some­thing that’s been on the cards for a while. The un­bundling and sep­a­rate list­ing of the phar­ma­ceu­ti­cal and con­sumer prod­ucts group is go­ing to dent Tiger Brands’ earn­ings – it cur­rently ac­counts for nearly a third of group prof­its.

Apart from the price fix­ing scan­dal at Ad­cock In­gram, it’s still not too clear why Tiger Brands wants the sep­a­ra­tion, other than that it doesn’t fit the fast-mov­ing con­sumer goods profile. How­ever, for Ad­cock In­gram a sep­a­rate list­ing (prob­a­bly in the re­gion of a fairly sub­stan­tial R7bn) looks promis­ing. It used to be the blue chip of the phar­ma­ceu­ti­cal in­dus­try and new man­age­ment with new plans look like they want to take the com­pany back there once cut free.

But then Mat­lare is quoted as say­ing Tiger Brands plans to spend around R4bn over the next five years on prod­ucts such as “soap and hand creams”. Do they plan to take on Unilever SA? And in un­bundling Ad­cock In­gram aren’t they get­ting rid of one of the top brands in the skin creams busi­ness, In­gram’s Cam­phor Cream?

Mat­lare also said Tiger Brands would in­vest out­side its home mar­ket. That makes more sense. The group is very SA based in terms of the prod­ucts it sells. And that ex­pan­sion seems off to a good start by ac­quir­ing 74,4% of Cameroon choco­late maker Cho­co­cam, though for some rea­son Tiger Brands is be­ing all coy about re­veal­ing the price it’s pay­ing.

The share price has re­cov­ered a lit­tle from the low it hit in March, but Tiger Brands has still lost a quar­ter of its value over the past year. It’s dif­fi­cult to pin­point whether that’s due to the rep­u­ta­tional dam­age of be­ing in­volved in not one but two price fix­ing scan­dals or from a tough mar­ket where con­sumer spend­ing is un­der pres­sure. Its share price is too low – but it may be some time be­fore it comes back.

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