Nigeria
| |
 |
|
(R’million) |
2013 |
|
%
change |
|
| Turnover (Rm) |
3 120,1 |
|
2 808,8 |
|
11% |
|
| Operating income before abnormal items (Rm) |
(281,9) |
|
(384,0) |
|
27% |
|
| Operating margin (%) |
(9,0%) |
|
(13,7%) |
|
|
|
|
Salient features
 |
Positive volume momentum |
|
Key efficiency benchmarks achieved |
|
Losses reducing progressively quarter by quarter |
|
Procurement initiatives to contribute positively in FY2015 |
Nigeria: Dangote Flour Mills (65,7% held by Tiger Brands)
Current year performance
The performance of this business has been disappointing, ultimately reflected in the impairment of both goodwill and other intangibles at a group level of R849 million and of assets in the underlying subsidiary of another R105 million.
The operating loss of R276 million reflects the impact of an extremely difficult and competitive trading environment which saw significant volume declines in the first quarter and ongoing margin pressures.
Remedial actions taken in the course of the year have included:
 |
a more market responsive and brand appropriate pricing strategy; |
|
a significant improvement in flour extractions to an acceptable benchmark; |
|
remodelling pasta formulation to meet relevant consumer benchmarks which has resulted in significant volume recovery in this category; |
|
the introduction of a soft wheat product offering; |
|
the mothballing of surplus flour milling capacity; |
|
the appointment of new management including a new CEO and CFO with extensive Nigerian FMCG experience; |
|
capital expenditure to expand silo capacity and improve the reliability of raw material discharge; and |
|
more efficient procurement of wheat. |
 |
|
Noel Doyle
Business Executive: Grains and Nigeria |
|
| The actions taken have resulted in a progressive improvement in the trading loss over the last three quarters from NGN1,4 billion (R89 million) in the first quarter to NGN700 million (R41 million) in the fourth quarter driven by both volume growth and margin improvement from internal efficiencies. The business was EBITDA positive in the fourth quarter before once-off items.
Outlook
Having substantially stabilised the operation, the focus for 2015 will be on reducing our raw material procurement costs and leveraging a more competitive and consumer-relevant offering into significant volume growth. In addition, focus will be on expanding the brand and product portfolio into a more premium offering, supported by an enhanced level of brand investment. This will require the remodelling of the current route to market to ensure greater distribution and more efficiency across the current product basket. Further reductions in trading losses are expected over the next year and it is anticipated that the business will be EBITDA positive for the 2015 financial year from a trading perspective.
Whilst there has been significant progress in assessing the possible entry into new categories, and the outlook in this regard is promising, it is unlikely that any such initiative will have a significant impact on the results in the short term.
Nigeria: Deli Foods (100% held by Tiger Brands)
Deli Foods recorded a similar operating income performance when compared with the prior year, with a slight reduction in volumes.
The Ebola threat in Nigeria has led to a delay in the implementation of key capital projects intended to improve efficiencies and capacity.
The market remains challenging with a fragmented competitive set and significant price-point constraints. |
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