Tiger Brands earnings fall on Kenya profit ‘manipulation’

Tiger Brands Ltd., South Africa’s largest food producer, said first-half earnings declined 2% as foreign-exchange losses at its Nigerian unit and profit “manipulation” in Kenya countered growth in its home market.

Earnings excluding one-time items from continuing operations dropped to R8.53 a share in the six months through March from R8.67 a year earlier, the company said Wednesday in a statement. Tiger sank 4.5% to R295.10 by the close in Johannesburg, the lowest since last June.

Nigeria’s central bank has devalued the naira twice against the dollar since Nov. 25. In Kenya, results from Tiger’s Haco unit “were negatively affected by the effects of pre-invoicing and the manipulation of profits in the previous financial year,” the company said. This offset “a solid performance” by the business, it said.

The Nigerian currency dropped 18% against the dollar in the reporting period as the price of crude, which makes up almost half of the West African nation’s exports, slumped 42%. Tiger has written down 954 million rand on its investment in Lagos-based Dangote Flour Mills, its key operation in the continent’s biggest economy, which it bought for about $173 million in 2012.

DFM “will require further financial support from its shareholders in order to further stabilize the business,” Tiger said. While an impairment wasn’t required at March 31, this will be reassessed at the end of the financial year, it said.

The full inflationary impact of the devaluation of the naira will probably be felt by consumers later in the year, according to the company.

“Potential for further foreign-exchange losses could have a material adverse effect on the results of the Nigerian businesses in the second half,” it said.

Sales in South Africa, where the company’s brands include Tastic Rice and Jungle Oats, increased 8%. The company raised its interim dividend by 3% to 3.39 rand a share.

- Bloomberg