Our opinion on the current state of TBS

Tiger Brands stands as a titan in the South African food industry, boasting an extensive portfolio of beloved brands that span a range of food categories. The company's resilience is tested time and again by challenges such as the tragic listeriosis outbreak, rising input costs, and the unpredictable South African consumer market. Despite these hurdles, Tiger Brands has shown an ability to adapt and persevere, as evidenced by its financial performance and strategic decisions.

The divestiture of its meat processing businesses in August 2020 for R311m was a significant move, likely aimed at streamlining operations and focusing on core areas where the company holds competitive strength. However, this decision also underscores the complexities and risks inherent in the food production industry.

Tiger Brands' vulnerability to fluctuations in consumer spending and input prices remains a critical concern, especially in the context of global crises like the Ukraine conflict, which threatens to exacerbate food inflation. The company's anticipation of stage 8 loadshedding further illustrates the operational challenges posed by South Africa's infrastructure constraints.

For the fiscal year ending on 30th September 2023, Tiger Brands reported a modest increase in revenue and HEPS, reflecting the tough trading conditions characterized by high food inflation and consumer price sensitivity. The significant rise in net finance costs, partly due to higher interest rates and a substantial share buy-back program, indicates a strategic approach to managing capital and shareholder value amidst challenging times.

The trading update for the four months leading to 31st January 2024 painted a picture of ongoing difficulty, with a slight decline in revenue and notable volume decreases. This performance suggests that Tiger Brands is still navigating the aftermath of previous challenges and adapting to the evolving consumer landscape, which has been notably affected by promotional activities and seasonal sales falling short of expectations.

Technically, Tiger Brands' share price trajectory reflects the broader volatility and challenges faced by the company. The break above its long-term downward trendline in July 2022 signaled a potential turnaround, which was subsequently dampened by operational challenges and market pressures. The recent appointment of Tjaart Kruger as CEO marks a new chapter for Tiger Brands, potentially steering the company through its current challenges towards a more stable and profitable future.

In summary, Tiger Brands exemplifies the resilience and adaptability required to navigate the complex and ever-changing food industry landscape. While the company faces significant challenges, including rising input costs, consumer spending pressures, and operational hurdles, its strategic decisions and leadership changes signal a commitment to overcoming these obstacles and sustaining its position as a leader in the South African food market.