Double whammy: Tiger Brands slumps as profits hurt by costs, listeriosis

By Liezel Hill

(Bloomberg) – Tiger Brands Ltd. tumbled after Africa’s largest listed packaged-food maker said full-year profit fell as much as 37 percent after one of its plants was blamed for South Africa’s listeriosis outbreak.

The shares dropped as much as 9.8 percent, the most since March 5, the day after the South African government identified a Tiger Brands factory as the source of the outbreak that has killed more than 200 people. The company recalled products and suspended factories in response.

Full-year earnings were affected by a challenging consumer environment, with pressure on volumes and pricing, “significant” cost increases and the impact of the recall and plant closures, Tiger Brands said in a statement Thursday. Expenses were driven up by an unfavourable rand movement and higher fuel prices, among other factors, it said.

Read also: Listeriosis; looming litigation threatens Tiger Brands kitty

The implication of Tiger Brands’s profit warning is that the decline in second-half earnings is worse than that seen in the first half, despite lower forecast fixed-cost losses and a typically stronger performance by the company’s grains division in the second six months, Morgan Stanley analyst Vikhyat Sharma wrote in a note, describing the update as “below expectations.”

The Tiger Brands weighed on other South African food producers. Pioneer Foods Group Ltd. dropped 3.5 percent, extending its decline to five days. An index of companies in the sector fell 4.1 percent.