6 / 202
2
Tiger Brands Limited integrated annual report
2015
Chairman’s letter to stakeholders
This integrated annual report is intended to give stakeholders a clear
understanding of Tiger Brands’ performance and its strategy for driving
growth in complex and competitive markets.
I am pleased to present results for the year to 30 September
2015 that underscore the progress achieved against our
strategy, despite the challenges experienced in certain of
our exports and international businesses.
Operating environment
In South Africa, a constrained economy has placed pressure
on consumers while increasing competitor activity,
particularly in the food sector, has exacerbated the
challenges. We elaborate on our operating environment on
page 22. Commendably, the group has maintained its
leading position in key categories, and protected both its
brands and margins through improved operational focus,
increased marketing investment and greater efficiencies.
Progress has also been achieved in reducing the group’s
environmental impact and managing our natural and human
resources more effectively, as detailed later in this report.
In Nigeria, the 55% decline in the oil price has had a
significant effect on the country’s government revenues while
the local currency devalued 25% against the US dollar over
the year. The capable team now in place in Nigeria has
managed these factors as well as could be expected,
increasing volumes and market share. This has, however,
not translated into an improved bottom-line result due to
the challenging trading environment.
Subsequent to the year end, the group announced that it
would not extend any further financial support to Tiger
Branded Consumer Goods plc (TBCG) (formerly known as
Dangote Flour Mills plc (DFM)) and indicated that it was in
discussions with the board of TBCG regarding future
funding options for TBCG. This decision was taken after
considerable and lengthy deliberations, taking into account
the group’s international expansion ambitions, especially in
the important Nigerian market, as well as the group’s
responsibility to the shareholders of Tiger Brands to deliver
an appropriate return on capital while managing risk. It is
the group’s intention to retain its interests in the other two
Nigerian businesses, namely Deli Foods and UAC Foods.
On 14 December 2015, the group announced that it had
reached agreement with Dangote Industries Limited (DIL) in
terms of which DIL would, subject to regulatory approvals,
provide TBCG with an immediate cash injection of
N10 billion (R0,7 billion). Tiger Brands would, in return,
sell its 65,7% shareholding in TBCG to DIL for a nominal
consideration of US$1 and write off its shareholder loans
to TBCG of R0,7 million. Tiger Brands will also assume
and settle outstanding debt guaranteed on behalf of
TBCG, amounting to R0,4 billion. The transaction is
aimed at ensuring that TBCG is maintained as a viable
going concern, able to retain its employees and meet its
obligations to its stakeholders.
Performance
Details of the group’s results are detailed by the chief
financial officer on page 32.
From the board’s perspective, we believe the 11% increase
in domestic operating earnings in a highly competitive
market underscores the strength of our brands, the capability
and experience of our management teams as well as the
commitment of our workforce.
While acknowledging setbacks during the period, we
are confident that the group’s strategy continues to
support our long-term growth ambitions. However,
renewed focus is required in respect of our international
expansion plans to ensure the delivery of sustainable,
profitable growth for the group.
Responsible citizenship
The current low rate of growth in South Africa cannot
address the challenges faced by the large number of
marginalised citizens in need of social and economic
upliftment. As a leading food producer, Tiger Brands is
playing its part together with government, NGOs and
other businesses through our corporate social investment
projects outlined later in this report. In the review period,
we invested over R24 million in projects focused on food
security, nutrition education, hygiene and sanitation.
We are particularly proud of the progress made by the Tiger
Brands Foundation through an integrated model of working
effectively with government to provide free breakfasts to
learners at schools throughout the country. In only four years,
this programme has grown to cover 64 schools in nine
provinces, providing the essential breakfast meal to over
43 000 learners. This year we reached the cumulative
milestone of 30 million meals served to needy learners who
would otherwise have started their daily studies hungry.