Tiger Brands HY revenue up 16%

South African food manufacturer Tiger Brands reported a 16% increase in revenue to R19.4 billion in the first six months of the year, but profit margins are under pressure due to rising costs. CEO Noel Doyle attributed the challenges not just to power cuts and load shedding, but also to broader consumer environment issues. The company is experiencing volume declines in discretionary categories like breakfast cereals, snacks, home care, personal care, and groceries, where consumers are cutting back amid limited disposable income. Tiger Brands has been trying to push through price increases to offset a 17% inflation rate during the reporting period, higher than the national food inflation rate. However, consumers are pushing back, especially in categories like groceries, personal care, and home care. Intense competition in base carbohydrate categories further complicates the situation, as companies begin to compete on price in the face of stagnant growth. Doyle highlighted that the company had hoped for a decrease in cost inflation, but the weakening South African Rand has hindered this. He noted that the company expected food price inflation to remain around 10% in the coming months, affecting the overall margins. Despite concerns from competition authorities regarding price increases, Doyle expressed confidence that shareholders should be more worried about margin compression and lack of profit growth. The CEO also addressed the challenges faced in Zimbabwe, a significant export market for Tiger Brands. He mentioned the volatility in the country's currency and the need for balance sheet management amidst depreciation against the US dollar. Despite recent difficulties, Tiger Brands remains optimistic about the long-term prospects in the Zimbabwean consumer market. In conclusion, Tiger Brands' revenue growth is overshadowed by margin pressures stemming from rising costs and consumer cutbacks. As the company navigates through intense competition and inflationary challenges, the focus remains on balancing price increases and volume growth to ensure sustainable profitability in the volatile market landscape.