Bad news about food prices in South Africa

South African food producer Tiger Brands warned on Monday of targeted price hikes to mitigate the impact of supply-chain risks from geopolitical uncertainty, including the Iran war.

The company’s shares rose about 2% after it reported a marginal increase in half-year earnings, boosted by a competitive environment in the first half of the financial year, with shoppers prioritising affordability.

The maker of All Gold ketchup and Jungle Oats said the ripple effects of geopolitical uncertainty, including the Iran war, are likely to be felt more in the second half of this financial year, affecting both supply chains and consumer disposable income.

Tiger Brands has been actively expanding its footprint in the informal market to counter declining volumes, increasing distribution by adding more transport routes.

Chief Financial Officer Thushen Govender said that would result in higher fuel usage, costing around 25 million rand ($1.54 million) per month.

The company said it is confident it can mitigate potential supply risks by addressing the inflationary pressure through additional improvement initiatives and targeted price increases aimed at limiting the impact on profitability.

Headline earnings per share from continuing operations, a key profit measure in South Africa, rose by 0.6% to 9.80 rand in the six months ended March 31, up from a restated 9.74 rand a year earlier.

Revenue increased 1.3% to 17.9 billion rand, primarily driven by volume growth of 2.6% and a price decrease of 1.3%.

On a like-for-like basis, excluding the impact of discontinued products and disposed businesses, normalised volume growth was 4.5%.

Tiger Brands said it will retain its staple foods business King Foods, reversing earlier plans to dispose of the unit as it refocuses on its long-term growth potential.

The company acknowledged it had previously “lost its way” with the business, which produces sorghum-based ingredients mainly used in traditional beer brewing, saying it now sees potential in it.

However, it said it has entered into an agreement to sell parts of its 95-year-old Beacon chocolate business.

The company declared an interim dividend of 430 cents per share, up 3.6%.