How will the devaluation of the Naira impact Tiger Brands? - CNBC Africa

How will the devaluation of the Naira impact Tiger Brands?


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The devaluation of the Naira will impact the yearly outlook of Tiger Brands business. PHOTO: sunnewsonline

The company’s turnover for the first quarter was 8,2 billion rand – indicating a 7 per cent increase in comparison to the same period of the previous  year.

“Volumes in the domestic businesses have moderated as the cumulative effect of price increases taken over the past year to recover input cost pressures has impacted on consumer offtake.  These input cost pressures have been exacerbated by the depreciation of the Rand,” said [DATA TBS:Tiger Brands].

Despite this, the company’s market share has remained steady. They also face strong business opposition.

(WATCH VIDEO: Tiger brands recalls of some of its cooking sauces and rice products)

Tiger Brands’ bakery output was negatively affected by the five week strike, during October and November 2014, in KwaZulu-Natal. The company saw improvement in the groceries business, while the Home and Personal Care section remained robust.

Dangote Flour Mills remained strong due to tight cost control and improved efficiencies in line with the company’s recovery plan. The results of the flour mills have, however, been negatively affected by foreign exchange losses on its foreign currency borrowings. This comes after the recent devaluation of the naira.

“The ongoing volatility and constrained liquidity in the Nigerian foreign exchange market have resulted in increased raw material input costs, which cannot be fully recovered in pricing due to the competitive environment. The volatility is expected to remain for the balance of the year, due to the collapse of the crude oil price and the political uncertainty relating to the general election,” said Tiger Brands.

(READ MORE: Dangote Cement seeks licence for 75 MW power plant in Tanzania)

The devaluation of the naira will impact the yearly outlook of business.

“The outlook for the year remains challenging, especially for the Nigerian businesses. In the domestic market, the cost saving initiatives implemented over the last few years continue to bear fruit and have, to an extent, mitigated  the ongoing cost pressures resulting from the weaker rand,” the company said.