S.Africa's Tiger Brands Q1 sales up 10% - CNBC Africa

S.Africa's Tiger Brands Q1 sales up 10%


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Tiger Brands, South Africa's biggest consumer foods maker. PHOTO: Tiger Brands

The company had something to celebrate although it battled slow consumer spending and tough competition at home.

Tiger Brands said sales totalled 7.7 billion rand in the three months to end-December but gross margins fell slightly because it could not fully pass on high input costs to consumers for fear of losing market share.

Shares in the maker of bread, breakfast cereal and energy drinks fell 1.5 percent to 258.49 rand, underperforming a slightly higher JSE Top-40 index.

Consumer demand in Africa's biggest economy remains tepid due to tentative economic growth while the weaker rand currency fuels inflation and pushes up the price of imported goods.

In response, South African companies are looking to the rest of Africa to boost returns. Tiger Brands bought Rafiki Millers Limited and Magic Oven Bakeries last month, giving it a substantial presence in Kenyan flour milling and bread baking industry. 

Tiger Brands said its businesses in Nigeria, Kenya, Zimbabwe and Cameroon lifted sales by 16 percent, nearly two times the rate of growth in South Africa - where it faces tough competition from the likes of Britain's Unilever PLC. 

However, the group's Dangote Flour Mills (DFM) unit in Nigeria continued to suffer operating losses due to intense competition. Tiger Brands competes with Nestle Nigeria Plc . 

"The impact of significant price discounting in the market continues to place pressure on margins and the turnaround in the performance of DFM over the medium term remains a key objective," Tiger Brands said.

Tiger Brands paid 188 million US dollars in 2012 to buy the business.