Carst and Walker

A very bad year for Tiger Brands

The listeriosis tragedy was just one of a series of setbacks for Tiger Brands, which has been slow to display a conscience…

What a relief it must have been for Tiger Brands’ remuneration committee that its 2018 financial year was a truly nightmarish one.

The difficult economic conditions drove every performance measure sharply south — so it didn’t have to grapple with whether to pay bonuses in a year in which 209 customers died of listeriosis.

  • Revenue was down 9%.
  • Squeezed operating margins meant operating income slumped 28%.
  • Headline earnings were 26% lower and cash from operations was gutted.

This meant there was absolutely no chance of short-or long-term bonuses for any Tiger Brands executives. Remarkably, if there had been earnings growth, there’s nothing in the group’s remuneration policy that would have stopped the committee from paying generous rewards, despite hundreds of people dying as a result of listeriosis picked up through one of the firm’s products.

This seems particularly bizarre, given that the company’s stated purpose is to “nourish and nurture more lives every day”. And lest you forget all the nourishing and nurturing, the recently released 2018 integrated annual report frequently reminds us of the group’s “Eat well, live well” tag-line.

As anybody who tracked the slew of listeriosis-related Sens statements issued between March and December 2018 will know, communication is not one of Tiger Brands’ strengths.

The statements were tone-deaf. The worst was the mid-March 2018 announcement, seemingly drafted by lawyers with ice in their veins. Did any shareholder take comfort from the news that the expected costs of the outbreak, which ranged from R337m to R377m, and that R94m could be reclaimed from insurers?

It has to be said, given the scale of the disaster, that the chance of the company striking the right note in its annual report was always going to be slim — but to delay discussion of listeriosis until page 30 is puzzling.

This was, after all, the defining event of Tiger Brands’ year, and it looks set to haunt it for several more.

At page 30, Tiger Brands chair Khotso Mokhele begins to discuss the issue with something close to appropriate levels of compassion.

He mentions the importance of food safety and the various levels of controls in place at the group before stating: “Despite these robust controls, the country’s worst outbreak of Listeria monocytogenes was attributed to our Enterprise facility in Polokwane. This was a truly devastating development to the Tiger Brands family, including the board, the leadership and the entire staff.”

Mokhele devotes much of his commentary to the disaster. “For our products — intended to nourish and be enjoyed — to have been identified as the cause of illness and death was singularly shocking. Our hearts go out to all the individuals and families in any way affected by the listeriosis outbreak.”

Waseem Thokan, head of research at Legae Securities, says any signs of contrition have to be seen in the context of a group that had not demonstrated significant attention to food safety in previous integrated annual reports.

The latest report is the first that includes food safety as a significant risk. The group even appeared to be late in dealing with the health effects of sugar.

“This attitude is in stark contrast to emerging global trends, where major food groups have become more proactive in dealing with these existential risks,” says Thokan, who believes the successful international players place much greater focus on stakeholder inclusivity…..

Financial Mail: Read the full article here

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