Tiger Brands Earnings: A Closer Look at the Numbers

Tiger Brands reported solid earnings, but analysis reveals unusual items boosted profits by R254m over the last year. While statutory earnings may be distorted, earnings per share have grown at an impressive rate over the last three years. However, there are concerns about the sustainability of these profits and one warning sign to consider.

Tiger Brands Limited (TBL), the South African food and beverage giant, reported solid earnings for the full year ended September 30, 2021 [1]. However, a closer look at the financial statements reveals unusual items that boosted profits by R254 million over the last year [2]. While statutory earnings may be distorted, earnings per share (EPS) have grown at an impressive rate of 9% and 12% over the last two and three years, respectively.

The company reported sales of ZAR 37,662.2 million, up from ZAR 37,388.5 million a year ago. Net income increased significantly to ZAR 3,028.5 million from ZAR 2,697.2 million a year ago. Basic EPS from continuing operations was ZAR 19.422, up from ZAR 17.247 a year ago. However, these figures include unusual items such as R732 million in once-off costs related to the canned vegetable product recall and civil unrest in July 2021 [2].

TBL's CEO, Noel Doyle, acknowledged the challenging second half of the year, with domestic revenue adversely affected by volume declines and lower overall price inflation [2]. Despite these challenges, effective cost containment and improved production efficiencies resulted in positive operating leverage, with domestic operating income (excluding once-off items) increasing by 19% to R2,9 billion.

However, concerns about the sustainability of these profits persist. The unusual items that boosted profits in the last year are not expected to recur, and the company faces ongoing challenges in its domestic market. Furthermore, the second half of the year proved challenging for TBL's exports and international businesses, with revenue increasing by only 7% to R3,6 billion [2].

In conclusion, while TBL reported solid earnings for the full year ended September 30, 2021, a closer look at the financial statements reveals unusual items that boosted profits and raise concerns about the sustainability of these profits. Investors should closely monitor the company's performance in the coming quarters to assess the impact of these challenges on TBL's long-term growth prospects.

References:
[1] MarketScreener. Tiger Brands Limited Reports Earnings Results for the Full Year Ended September 30, 2021. 19 November 2021. https://www.marketscreener.com/quote/stock/TIGER-BRANDS-LIMITED-1413421/news/Tiger-Brands-Limited-Reports-Earnings-Results-for-the-Full-Year-Ended-September-30-2024-48527068/
[2] Tiger Brands. Tiger Brands --- Full-Year results announcement. 19 November 2021. https://www.tigerbrands.com/Global/Articles/Tiger-Brands---Full-Year-results-announcement