Tiger to build bak­eries in Africa

Finweek English Edition - - COMPANIES & INVESTMENTS - Garth The­unis­sen

Tiger Brands plans to build new bak­eries in Nigeria and Kenya in an ef­fort to boost non-South African rev­enue while at the same time re-or­gan­is­ing its food man­u­fac­tur­ing, distri­bu­tion and ad­min­is­tra­tion di­vi­sions to re­duce costs.

The Jo­han­nes­burg–based com­pany also plans to be­gin ex­port­ing noo­dles from its newly ac­quired Dan­gote Flour Mills (DFM) plant in Nigeria to Ethiopia, chief ex­ec­u­tive of­fi­cer Peter Mat­lare told Fin

week in a tele­phonic in­ter­view. Tiger will con­tinue to push hard to grow its food ex­port busi­ness, which has more than dou­bled op­er­at­ing in­come in the last fis­cal year to R451m and now ac­counts for 16% of group rev­enue.

“The rest of Africa doesn’t have bak­eries of the scale and so­phis­ti­ca­tion that we have here in SA, so a log­i­cal g thing g for us to do is to look at set­ting up bak­eries in other parts of the con­ti­nent,” said Mat­lare. “We’ll prob­a­bly start by build­ing one bak­ery in Nigeria, see how that goes and if it’s suc­cess­ful, we’ll put up an­other. Kenya is an­other mar­ket where we’re look­ing to put up a bak­ery.”

Mat­lare has stated pub­li­cally that he wants to boost Tiger’s non-South African rev­enue from a cur­rent 26% to 30% of group sales in the next two years and 50% dur­ing the course of his ten­ure as CEO. Tiger has al­ready spent more than R2bn on ac­qui­si­tions in the rest of the con­ti­nent over the last two years, in­clud­ing the R1.5bn it paid for the 63.35% stake in DFM.

It also paid R421.1m for a 49% stake in Nigeria’s UAC Foods and R296.3m for 100% of Deli Foods Nigeria. Tiger also forked out R112.8m for a 51% stake in East Africa Tiger, its joint ven­ture in Ethiopia.

Grow­ing the busi­ness through ac­qui­si­tions is not with­out its headaches though, and Mat­lare said Tiger has “a bucket load of work to do” to in­te­grate DFM into the rest of the group.

How­ever, the need to re­duce its re­liance on SA was clear in its most re­cent set of fi­nan­cials, which showed a mere 5% rise in at­trib­ut­able profit to R2.7bn for the 12 months to end-Septem­ber. Though rev­enue climbed 11% to R22.7bn, per share earn­ings rose just 4.6% to R16.72, while op­er­at­ing in­come from domestic op­er­a­tions added just 1.6% to R3.2bn.

“Th­ese are not really re­sults you stand on the roof and crow about, but we’d say

they’re rea­son­able given the eco­nomic cli­mate,” said Mat­lare.

South African con­sumers re­main un­der pres­sure amid ac­cel­er­at­ing in­fla­tion, a per­sis­tent un­em­ploy­ment rate of about 25% and the slow­est eco­nomic growth rate since the 2009 re­ces­sion. To counter that Tiger plans to go on a cost-cut­ting drive that will see it re­or­gan­ise its lo­gis­tics, pro­cure­ment and ad­min­is­tra­tive pro­cesses in a plan that could re­sult in job losses.

Mat­lare says the com­pany is cur­rently eval­u­at­ing whether or not to re­duce its fleet of 600 vans and trucks and is press­ing ahead with plans to re­duce du­pli­ca­tion of tasks in its fi­nance, ad­min­is­tra­tion and pro­cure­ment di­vi­sions.

Food man­u­fac­tur­ing plants will also be con­sol­i­dated, while man­age­ment looks to “lever­age Tiger’s mus­cle” to achieve more com­pet­i­tive prices from sup­pli­ers, ac­cord­ing to Mat­lare.

“We have 14 bak­eries in SA, and one of the ques­tions we ask is whether we really need that num­ber or do we down­scale,” he said. Mat­lare ad­mit­ted that the drive for greater ef­fi­cien­cies in SA would re­sult in some job losses but added that the com­pany would make ev­ery ef­fort to re­de­ploy peo­ple within the group.

“There will be some heads out but we have no head­count re­duc­tion tar­get,” he said.

Peter Mat­lare

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