November 22, 2019 / 7:25 AM / 18 days ago

UPDATE 1-Tiger Brands' annual earnings drop 17% on tepid recovery at meat unit

(Adds details on results, background)

JOHANNESBURG, Nov 22 (Reuters) - South Africa’s Tiger Brands posted a 17% drop in its annual earnings on Friday, dented by ongoing margin compression across the grains portfolio, lower sales in export markets and slower-than-anticipated recovery of its processed meat business.

The country’s leading food producer, with brands such as Jungle Oats and Tastic rice, said its headline earnings per share (HEPS) from continuing operations in the year ended Sept. 30 dropped to 1,349 cents from 1,633 cents last year.

HEPS is the main profit measure in South Africa and strips out certain one-off items.

Full-year revenue from its Value Added Meat Products (VAMP) business, which was temporarily closed last year following the world’s largest ever listeriosis outbreak, dived 39% to 654 million rand ($44.48 million), while the company also incurred an operating loss of 547 million rand.

Listeriosis is a disease which causes flu-like symptoms, nausea, diarrhea and infection of the blood stream and brain.

“Although there was steady improvement in VAMP’s performance since the reopening of the manufacturing facilities, the second-half performance was below expectations,” it said in a statement.

The company is facing a class action lawsuit over its role in the listeriosis outbreak that killed more than 200 people in South Africa and was traced back to a factory run by Tiger Brands-owned Enterprise Foods.

The South African food producer said it filed its plea in August in response to the class action summons received earlier this year, and will “continue to conduct its defence in a responsible manner while remaining committed to the matter being resolved as soon as possible.”

The group is exploring the sale of its processed meats business after an internal review had concluded it was “not an ideal fit” within the portfolio.

In the grains portfolio, revenue increased by 4% to 13.2 billion rand, reflecting price inflation of 6%, while overall volume declined by 2%, Tiger Brands said.

“Price inflation was insufficient to offset the impact of higher input costs, with operating income declining by 24% to 1.4 billion rand,” the food producer said.

The operating margin there consequently reduced to 10.9% from 14.8%. ($1 = 14.7033 rand) (Reporting by Nqobile Dludla, Editing by Sherry Jacob-Phillips)

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