27 May 2016 Tiger Brands’ new CEO on the way forward

South Africa’s biggest consumer foods maker, Tiger Brands, has pledged a sweeping overhaul of its operations this week, after a botched investment in Nigeria and mounting difficulties in its home and exports markets force a re-think. 

New chief executive Lawrence MacDougall, who is just two weeks into the job, faces shrinking demand in African export markets such as Nigeria and Mozambique, and a bleak outlook in South Africa, Tiger Brands’ largest market, where consumer confidence is near 14-year lows.

“Being able to focus our attention and being able to prioritise where we spend our money is going to be critical to a good set of results,” MacDougall (left) said.

“We need to know which buttons to push and which to prioritise,” he told reporters after an interim results presentation for the company, which makes bread, breakfast cereals and energy drinks.

Tiger Brands warned that tough trading conditions would persist for the rest of the year, echoing its smaller rival Pioneer Food Group, which said this week that a severe drought and rising interest rates were heightening concerns over South Africa’s economic outlook.

Inflation in South Africa is expected to average 6.7 percent in 2016, the central bank said last week, while low growth is set to persist.

Nigeria lessons

It was partly to offset slow growth at home that Tiger Brands paid nearly $200-million for a 65.7 percent stake in Nigeria’s Dangote Flour Mills in 2012. But it failed to stem losses at the venture and sold it for just $1 in December last year.

Nigeria’s economy has been hit hard by the oil price slump and currency shortages.

Chief operating officer Noel Doyle told Reuters the company would tread more cautiously in uncharted markets and currency and inflation concerns could dampen the appeal of any acquisitions in the near future.

“If we brought a big acquisition today to the market in Africa shareholders would quite rightly have a lot of questions about it and there would be some resistance,” he said.

Currency devaluations in export African markets such as Nigeria and Mozambique have hit demand and threaten to permanently hurt operations.

Operational challenges in Tiger Brand’s Deli Foods – its last remaining business in Nigeria – and in Mozambique have also prompted the firm to buckle down and focus on fixing problems rather than growing its footprint.

“They need to tighten up and do a thorough review so that they don’t make the same kind of mistake they made with Nigeria in future,” Absa Wealth investment analyst Chris Gilmour said.

Tiger Brands posted total sales up 9 percent to R15.9 billion and declared an interim dividend of 363 cents per share. They reported flat headline earnings per share (EPS) of 978 cents on continuing operations but a 14 percent rise in headline earnings per share (EPS) to 974.6 cents on continuing and discontinued operations.

Additional reading:

Tiger Brands: New head, new fortunes?

Two weeks into the top job at food producer Tiger Brands, and CEO Lawrence MacDougall has clearly hit the ground running.

MacDougall – who is no newbie to the fast moving consumer goods segment with more than 25 years of experience – is the man tasked with bringing life to the struggling Tiger.

The former executive vice-president and regional president for Eastern Europe, the Middle East and Africa at American food and beverage conglomerate Mondelez International, MacDougall announced this week that he will embark on a full strategic review of Tiger.

“The company is moving into difficult times and there is now a shift in Tiger’s product categories and shopping patterns of consumers. The strategic review is the right thing to do and it will give us direction.

“The review will look at our portfolio in SA and international markets to understand it,” MacDougall tells Moneyweb.

He stresses that there is nothing new to Tiger’s strategic review, as it’s an on-going initiative. But its likely it won’t be run-of-the-mill, as it comes at a time when Tiger’s bad investment decisions of recent years have seen it  lose market share to peers such as Pioneer Foods, RCL Foods, and Rhodes Food.

Furthermore, the operating environment for Tiger, the maker of consumer brands like Albany bread, Tastic rice, Koo beans, All Gold, Jungle Oats and more, has been even more cut throat – with hard-pressed consumers facing sustained rising costs…..

MoneyWeb Today: Read the full article

MacDougall says the solid results were achieved from a business that the executive team “has managed to stabilise”.

The fact that the executive team itself is not stable – with chief financial officer Funke Ighodaro resigning recently and MacDougall joining on 10 May after chief operating officer Noel Doyle stepped in as interim CEO following the departure of CEO Peter Matlare at the end of last year – was raised as a concern by one investor who wanted to see “institutional memory” retained. MacDougall says he will try to balance knowledge and experience with fresh ideas…..

FinWeek: Read the full article