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Tiger Brands Limited Integrated Annual Report
2014
Performance review
Significant progress has been made in
addressing the challenges in DFM and, as a
result, the net reported loss before interest and
tax for the Nigerian businesses improved by
27% to R282 million (2013: R384 million).
Following a review of the utilisation levels
of its assets and, based on current market
realities, DFM impaired certain of its
manufacturing assets. The related impairment,
amounting to R105 million, was in addition to
the R849 million impairment of goodwill and
other intangibles recognised at a group level
at the half year. Tiger Brands remains
committed to the Nigerian market and will
continue to fix and optimise the DFM business,
whilst investing into adjacent categories
that are expected to deliver long-term
profitable growth.
Domestic operations
The group continues to make steady progress in
executing against its long-term strategic
objectives. Over the last few years, the group
has directed its focus to regaining market share
in its core domestic businesses through
investment in its brands and increased levels of
innovation. This remains a key objective even
though total market volumes have been
impacted by the ongoing financial pressure
being experienced by consumers.
The group has retained its leading brand
positions in all of the key categories in which it
participates, through a strong focus on price
and volume management, supported by
increased marketing and brand-building
activities. Good progress has been made
in regaining volume shares in what remains
a highly competitive domestic trading
environment. In 2014, domestic volume
growth of 4% was achieved.
Improved operational efficiencies and various
cost saving initiatives have supported the
increased investment in marketing and brand
building, and have also mitigated the effect of
above-inflationary increases in raw material,
labour and other input costs that were
experienced in 2014. Input cost pressures
were exacerbated by the weaker Rand,
contributing to a decline in the overall domestic
operating margin from 14,9% to 14,5%.
Margins were also affected by consumer
down-trading, which has resulted in
manufacturers competing more intensely
on pricing.
Given the ongoing challenges in the domestic
economy, the group continues to focus on
regaining market share through brand-building
activities, innovation and expansion into new
and adjacent categories. The group is also
focused on improving its innovation capability
and in 2014, innovation contributed 3,3%
(2013: 3,0%) of group turnover. Tiger Brands
will continue to optimise its brand portfolio and
strengthen its participation in the growing
“value” segment.