www.tigerbrands.com TIGER BRANDS LIMITED RESULTS PRESENTATION TO INVESTORS for the six months ended 31 March 2014
2 Agenda Business Financial Analysis Strategic Review Performance Nigeria Business Business Business Performance Performance Performance Grains Consumer Brands International Outlook
www.tigerbrands.com Strategic Review Peter Matlare Chief Executive Officer
Group 4 Nigeria Grains Consumer Brands Exports and International OVERVIEW • South African trading conditions remain tough – Household income significantly constrained – Highly competitive retail environment as retail sales slow – Escalation in raw material, labour and input costs • Pleasing performance in Grains, TBI and Exports businesses • Strategic pricing objective achieved in driving volume growth in Groceries • Dangote Flour Mills – Goodwill and intangibles impaired to reflect current underperformance of the business – Nigerian market remains attractive – Challenging trading conditions persist • Over-capacity in the sector fuels aggressive competitor activity • Impact of security concerns in northern Nigeria – Much work still to be done in DFM – Urgent action being taken to improve performance • UAC Foods continues perform satisfactorily • On track with strategies to build a sustainable platform – Investment in people and brands to maintain market leadership
Group 5 Nigeria Grains Consumer Brands Exports and International GLOBAL ECONOMY RECOVERING SLOWLY BUT SUB-SAHARAN AFRICA GROWTH PROSPECTS ENCOURAGING Global Economic Growth Y-o-Y % change 2012 2013 2014 2015 • The IMF revised its outlook for global GDP Global 3.1 3.0 3.7 3.9 growth upwards to 3.7% for 2014 on the back of muted recovery in advanced economies Advanced markets 1.4 1.3 2.2 2.3 • Global recovery is expected to be gradual Emerging markets 4.9 4.7 5.1 5.4 and uneven • Emerging market economies have faltered, SS-Africa 4.8 5.1 6.1 5.8 experiencing financial volatility and domestic structural weakness South Africa 2.5 1.9 2.3 3.0 • Growth in Sub-Saharan Africa is forecast to remain robust and accelerate in 2014 • South African economy is expected to Y-o-y % change 2013 2014 2015 decelerate due to: Kenya 5.6 6.3 6.3 – Tense industrial relations in the Nigeria 6.3 7.1 7.0 mining sector – Low private investment Ethiopia 9.7 7.5 7.5 – Weak consumer and investor confidence Cameroon 4.6 4.8 5.1 Source: IMF, World Economic Outlook, January and April 2014
Group 6 Nigeria Grains Consumer Brands Exports and International MARKET TRENDS SHOW SLOW RECOVERY FOR CATEGORIES IN WHICH TIGER BRANDS PARTICIPATES Market recovery slow Total South Africa Category Volume and Value Growth Trends • Last 12 months’ category volumes recover relative to previous year 8,0 7,2 6,9 7,0 • H1 2014 recorded a volume growth of 1% 6,2 6,0 5,0 4,0 3,0 2,0 1,5 1,1 1,0 1,0 0,0 Mat LY vs Mat TY H1 Curr vs H1 YA 3mm Curr vs Prev Category Value Growth Category Volume Growth Source: Nielsen March 2014
Group 7 Nigeria Grains Consumer Brands Exports and International STRATEGIC FOCUS AND BUSINESS MODEL Geographic II. International expansion and new category expansion Reignite Topline and regain Operating market Leverage People & share brand III. Investment in investment people and brands I. Focus on domestic businesses and Innovation Optimise efficiencies and deliver cost savings Profitable growth and cash flow
Group 8 Nigeria Grains Consumer Brands Exports and International STRATEGIC THRUSTS – DOMESTIC BUSINESSES • Tiger Brands’ domestic businesses currently contribute 75% to group revenues and 91% to group EBIT, therefore continued health and sustainability is paramount • Domestic businesses also underpin Tiger Brands’ international expansion plans Contribution to Tiger Brands TBI & Exports 15% (EBIT: 20%) Domestic Nigeria Businesses 10% (EBIT: -11%) 75% (EBIT: 91%)
Group 9 Nigeria Grains Consumer Brands Exports and International CONTEXT FOR PERFORMANCE • Slow down in consumer spending in 2013 Real GDP growth 8 continued into 2014 due to inflationary 6 increases in food prices, fuel and energy costs • Above CPI inflationary increases in producer 4 YoY % change price inflation, exacerbated by rand weakness 2 • Weak business confidence weighs on formal 0 employment growth -2 • Consumers continue to adjust their -4 consumption habits 2001-Q1 2003-Q2 2005-Q3 2007-Q4 2010-Q1 2012-Q2 2014-Q3 – Favouring lower priced products Y-o-Y % change 2012 2013 2014 2015 – Forgoing purchases of discretionary items 11.0 7.9 4.1 3.0 Durable goods Semi-durable goods 6.2 6.7 4.9 4.8 Non-durable goods 2.5 2.2 1.7 2.6 Services 1.8 0.3 2.0 3.5 Total FCE – 3.5 2.6 2.5 3.3 Volume growth Source: Investec, April and May 2014
Group 10 Nigeria Grains Consumer Brands Exports and International DOMESTIC PERFORMANCE CHARACTERISED BY CONSUMER SEARCH FOR VALUE • Consumer buying behaviour driven by focus on “value” – Addressed in the domestic business through pricing restraint – Intensified customer activity – Discretionary category pressures • Operational consolidation and efficiency gains – Manufacturing consolidation – Real procurement gains – Leverage supplier relations • Sustained investment in key enablers – Capital projects – Investment in people – diversification of skills – Focus on innovation and brand strength
Group 11 Nigeria Grains Consumer Brands Exports and International TIGER BRANDS CONTINUES TO RETAIN LEADING POSITION IN MOST OF ITS CATEGORIES March 2014 Position We understand and continue to invest Insecticides 1 in brands Homecare Sanitary cleaners 2 Air Care 3 • All Gold Tomato Sauce maintained market Face Care 3 Hand & Body 3 leadership for over seventy years Personal care Hair Care 3 Hair Styling Preps 1 • Albany has held a leading position in the bread Deodorants 6 Tomato sauce 1 market for more than ten years Canned Tomato products 1 Baked Beans 1 • Koo voted as one of South Africa’s most loved Culinary Canned Vegetables 1 Jam 1 brands (ahead of Coca-Cola) in the Sunday Peanut Butter 1 Times National survey 2013 Mayonnaise/salad cream 1 Rice 1 • Tastic has been market leader for over fifty Bread 1 Grains RTE Cereals 3 years; voted as the No.1 brand in the Essential Hot Cereals 1 Foods Category for the last twelve years Pasta 1 Baby Care 2 Baby Baby Food 1 Baby Cereal 1 Countlines 3 Slabs 3 Confectionery Sugar sweets 1 Boxed Assortments 1 CPM Chilled Processed Meats 1 Sports Drinks 2 Beverages Liquid Concentrates 1 Source: Nielsen March 2014
Group 12 Nigeria Grains Consumer Brands Exports and International STRATEGIC THRUSTS – INTERNATIONAL EXPANSION • Strategic intent – Tiger Brands will continue to expand internationally – Nigeria remains important to Tiger Brands and priority is to fix and grow our existing businesses – We will continue to evaluate opportunities as they present themselves • Dangote Flour Mills – Goodwill and intangibles impaired in full • Underestimated challenges of operating in Nigeria • New industry surplus capacity came on stream as we entered the market • Increased wheat levy compounded margin compression • Paid strategic premium for the business to achieve immediate scale in Nigeria – Management changes made to strengthen the team • Seamless integration between SA Grains Business and DFM – Aggressive thrust to fix the cost base and grow topline
Group 13 Nigeria Grains Consumer Brands Exports and International AFRICA AND GLOBAL EXPORTS – THE SUCCESS STORY CONTINUES …. • Tiger Brands International and Exports – Excellent performance driven by strong topline growth – Chococam (Cameroon) – exceptional performance and growing export potential – Haco (Kenya) – strong export growth and pleasing stationery sales – EATBI (Ethiopia) – continued good progress – Davita – building brand equity in neighbouring countries – Exports – entrenching core brands in southern Africa – Langeberg & Ashton Foods – pleasing performance
Group 14 Nigeria Grains Consumer Brands Exports and International ANALYSIS OF TURNOVER GROWTH FOR THE SIX MONTH PERIOD ENDED 31 MARCH 2014 R 15,0 Billions Volume 11% Turnover growth 4% R 14,5 Forex 3% R 14,0 Pricing 4% R14.9bn R 13,5 R 13,0 R 13.4 bn R 12,5 R 12,0 March 2013 Turnover Pricing Forex Total Volume March 2014 Turnover
Group 15 Nigeria Grains Consumer Brands Exports and International EARNINGS PER SHARE – CONTINUING OPERATIONS
Group 16 Nigeria Grains Consumer Brands Exports and International HEPS (CENTS) – CONTINUING OPERATIONS FOR THE SIX MONTHS ENDED 870 856 860 850 840 830 820 810 802 800 790 780 770 Mar-13 Mar-14
Group 17 Nigeria Grains Consumer Brands Exports and International TOTAL DISTRIBUTION CENTS PER SHARE FOR THE SIX MONTHS ENDED 31 MARCH 335 329 330 325 320 315 310 310 305 300 Mar-13 Mar-14
www.tigerbrands.com Financial Analysis Funke Ighodaro Chief Financial Officer
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