South Africa- Consumers under pressure as costs rise


Tiger Brands Ltd. said the risk of higher inflation will place pressure on South African consumers as the nation’s biggest food producer is raising prices to try to offset cost pressures following record corn prices.

Headline earnings per share from continuing operations, which exclude one-time items, were 9.78 rand ($0.62) in the six months ended March 31 from 9.75 rand a year earlier, the Johannesburg-based company said in a statement Tuesday.

Tiger sold its unprofitable Nigerian business to Dangote Industries Ltd. with effect from Feb. 25, treating this as a discontinued operation. The interim dividend rose 7 percent to 3.63 rand a share.

The weak rand and the worst drought in more than a century have boosted South African food costs and threaten to keep inflation outside the central bank’s 3 percent to 6 percent target range for an extended period.

There are indications that the pass-through from the exchange rate to inflation is increasing and food-price growth is forecast to climb to about 12 percent in the third quarter of this year, the central bank said last week.

“The outlook for the balance of the year remains challenging, with downside risk to the macroeconomic environment, both in South Africa and in a number of African markets, likely to add further pressure on consumers,” Tiger said.

“The key challenge will be to maintain volume momentum notwithstanding price increases that are currently being taken to partially offset the cost pressures.”

Lawrence Mac Dougall, who previously headed Mondelez International Inc.’s eastern Europe, Middle East and Africa business, was appointed chief executive officer in March to replace Peter Matlare, who resigned last year after overseeing a 954 million-rand writedown related to the company’s Dangote Flour Mills unit in Nigeria that was bought for about $152 million in 2012.

The stock fell 0.2 percent to 337.90 by the close in Johannesburg Monday, giving the company a market value of 64.9 billion rand.



Source: bloomberg