Listeriosis Tiger Brands reveals first quarter losses and there's more to come
Tiger Brands has published its interim financial results for the six months ended March 2018, how badly profits were hit by the listeriosis outbreak traced to Enterprise Food plant in Polokwane.
Latest figures say the death toll has topped 200 and many victims who survived have been left with permanent health issues. The UN says it is the world’s worst outbreak and countries across the world placed a ban on imports of South African chilled meat in the wake of the deaths.
Share prices in Tiger Brands fell yesterday when it issued its interim financial statement revealing a “slow start to the year under difficult trading conditions,” as sales dropped 4 per cent from a year earlier to 15.7 billion ($1.3 billion) and revenue from value-added meats were down 9 per cent. The outlook for the rest of the year “remains challenging,” the Johannesburg-based company said in a statement.
The recall associated with its value-added meat processing (VAMP) amounted to R415 million, but balanced at R363 million, net of the R50 million insurance claim, and R2 million in profit from the disposal of related property.
HEPS was down 16 per cent to 868 cents, while an interim dividend was declared at 378cps.
“With the exception of VAMP, the group’s core domestic food businesses delivered a steady performance in the six-month period ended 31 March 2018, notwithstanding intense competition and ongoing pressure on pricing as consumers continually search for value,” the group said. (continue below)
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However, the R363 million blow was certainly felt, with a further R183 millionhanging in the balance as tests for Listeria continue on remaining stock.
In March, the group suspended operations at its factories in Polokwane, Germiston and Pretoria, which the department of health linked to the listeriosis outbreak which has claimed over 200 lives in South Africa so far, and infected over 1,000 others.
It also recalled all Enterprise products across the country.
At the time, Tiger Brands projected that the recall would cost it as much as R377 million, but its latest results show that the total associated costs with the move hit R415.2 million (before insurance) – with more to come.
With operations expected to only be back online in September, that means the group stands to lose a further R250 million in the five months between its financial year-end and the recommencement of operations.
Tiger Brands is also facing further losses through two class action lawsuits which have been launched by attorneys representing those affected by the listeriosis outbreak.
The first class comprises all persons who consumed a processed meat product manufactured by the company and who became ill as a result of such food product being contaminated with listeria at any time between 1 May 2017 to the date of issue of summons in a class action to be brought.
The second class comprises the dependents of persons who consumed a processed meat product manufactured by the company and who died as a result of such food product being contaminated with listeria at any time between 1 May 2017 to the date of issue of summons in a class action to be brought.
The total amount claimed against Tiger Brands and Enterprise Foods is estimated at R425 million.
Speaking on the lawsuits in its results presentation, Tiger Brands said it is “carefully considering the best approach to ensure that the recently launched class actions are handled sensitively and responsibly having regard to all the facts”.