Regarding its recent investment decision in Dangote Flour Mills (now Tiger Branded Consumer Goods Plc), Tiger Brands said the action is not a vote of no confidence in Nigeria, as Tiger Brands retains its 50 percent interest in UAC Foods and its 100percent interest in Deli Foods.
In a recent conference call, Peter Matlare, CEO, Tiger Brands said the company still looks at all opportunities and consider them on their merits.
“Africa remains fundamental to Tiger’s international growth strategy and we will continue to develop in these markets and invest appropriately to drive penetration. Despite some challenges in our African businesses, expansion in Africa represents a growth opportunity for the group”, Matlare said.
Responding on whether the company regrets acquisition of a significant stake in Dangote Flour Mills (DFM) since 2012, he said, “Hindsight is always a perfect science! At the time, it was the right decision but we could not have anticipated the global economic circumstances which would impact the business.”
“The challenges which have faced DFM include significant over capacity in the industry, the impact of low oil prices and the devaluation of the Naira against the US Dollar, and could not have been foreseen.
“The inability of the company to pass on cost increases to the market has contributed significantly to the losses. Since its acquisition in 2012, the performance of the business has been disappointing, despite a number of proactive steps taken by Tiger to improve the situation,” Tiger Brands CEO further said.
Responding on what informed Tiger Brands choice of buying into the Nigerian company and whether Tiger Brands still has confidence in retaining this investment for a long time, he said: “In 2012, Tiger Brands bought a 63.35% shareholding in Dangote Flour Mills, the second largest flour milling Company in Nigeria primarily for its significant downstream interests in Pasta and Noodles and strong branding, production and distribution capabilities.”
“The acquisition represented an important step in Tiger Brands growth strategy on the balance of the continent and added substantial scale to the Groups existing interests in Nigeria. The Nigerian market was recognised as one of the fastest growing in sub-Saharan Africa, and represented a significant growth opportunity for the Group. The options for the future of the company are still being considered”, Matlare said.
With the withdrawal of further funding to Tiger Branded Consumer Goods Plc, which has been struggling with losses over the years, he said “a variety of options are being considered, which could include a partnership, a sale, a merger, but no decision has as yet been made”.
Also responding on whether Tiger Brands considers Tiger Branded Consumer Goods Plc a viable business in the light of the food industry, macroeconomic and the group investment strategy and goals; he said: “The challenges which have faced DFM include significant over capacity in the industry, the impact of low oil prices and the devaluation of the Naira against the US Dollar, and could not have been foreseen.”
“The inability of the company to pass on cost increases to the market has contributed significantly to the losses. These factors make this a challenging business in the medium term”, he said.
Iheanyi Nwachukwu
