Tiger Brands braces for tough second half as Covid-19 disrupts supply chains

Food producer Tiger Brands is bracing for a tough second half as Covid-19 disrupts supply chains and hits consumer spending, saying this could cost it more than R500 million in lost profits.

As existing stock is depleted the group expects its six months to September will be affected by a cost push due to rand weakness, global supply chain disruptions and additional costs incurred during the lockdown, the group said.

The effect of the pandemic on consumer spending is expected to be “dire”, while government restrictions on price increases could also have an affect.

“We anticipate that demand patterns will change and are preparing for significant changes in consumption and shopping behaviour as we move out of the acute phase of the national disaster period and into what is likely to be a deep and prolonged recession,” said CEO Noel Doyle.

Worsening economic conditions in some of the group’s markets already weighed on it during its six months to end-March, when profit slumped by three-quarters to R359.6m, when treating its Deli Foods Nigeria business as a discontinued operation.

The group wrote down some of its businesses by R557m. This mostly affected its export businesses, namely Davita, which produces soft drink powder and seasoning; and its deciduous fruit business.

An impairment was also recognised against the investment in Nigerian associate, UAC Foods, the group said, that results from difficult trading conditions due to deteriorating economic prospects, worsened by the Covid-19 pandemic.