Sorting its head from its tail
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.