South African food producer Tiger Brands said on Monday it is looking at “significant” job cuts and won’t pay an interim dividend as its business is hit by supply disruptions and margin pressures due to the impact of the coronavirus.
The owner of Jungle Oats and Tastic rice said first-half headline earnings fell 35% and it expects coronavirus-related costs of about R500 million ($28 million) to hit profit in the second half due to rand weakness, global supply chain disruptions and additional costs incurred during a lockdown in South Africa to curb the spread of the virus.
As a result the company has started looking at cost-cutting measures, including possibly “significant” job cuts, Chief executive Noel Doyle told reporters in a media call.
“Not just in headcount but right across our whole offering and of course we have to look at a couple of the categories where we have been incurring significant losses,” he said.
Tiger Brands employs more than 11,200 people in South Africa, excluding seasonal staff, a company spokesperson said.
Tiger Brands said it had decided not to declare an interim dividend in order to preserve cash, adding that it would re-consider an annual dividend at the end of the year depending on the group’s trading performance.
Headline earnings per share from continuing operations fell to 501 cents in the six months ended March 31, the company said, from 773 cents in the same period last year. Pretax profit from continuing operations fell 65% to R673 million.
“The group’s overall performance reflects the difficult trading environment and the challenges faced, particularly within grains, groceries, Value Added Meat Products (VAMP) and exports,” Tiger Brands said in a statement.
Group revenue from continuing operations increased by 2% to R15.7 billion. However, group operating income dropped by 29%, with operating profit margins declining to 7%, impacted by lower volumes, raw material and conversion costs rising ahead of inflation and increased marketing investment, it said.
“These costs, together with the effect of government regulations on pricing during the national disaster period, may have an impact in excess of R500 million on profitability (in the second half),” the company said.