South African consumer goods group Tiger Brands has booked an impairment charge on Nigerian unit Dangote Flour Mills of ZAR849m (US$82.1m).
Tiger said the “under-performance” of the asset, plus “excess milling capacity” in the Nigerian flour market led the company to review the carrying value of its investment in the business.
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The charge will be included in the accounts for the first half of Tiger’s financial year, a period that ran until the end of March. Tiger plans to publish its full half-year accounts on Wednesday (21 May).
Tiger insisted it saw a future for its investment in Dangote Flour Mills.
“Tiger Brands is focusing its attention on enhancing the long-term prospects of its investment in DFM,” the company said in a statement to the Johannesburg stock exchange on Thursday.
“In this regard, the company continues to believe that Nigeria is central to its expansionary ambitions. Short- to medium-term action-plans are being implemented to turn around the performance of the DFM business. The company is also in the process of evaluating a number of key strategic initiatives aimed at rapidly expanding the business into more sustainable, value-added categories. At this stage, there is still a significant amount of work that needs to be completed to properly evaluate the new category opportunities, which if viable, should enhance margins and improve the capacity utilisation of existing DFM assets.”
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By GlobalDataExcluding the Dangote Flour Mills impairment, Tiger said its first-half earnings per share from continuing operations will increase by 6-10%. Headline earnings per share from continuing operations will increase by between 5% and 9%, Tiger said.
Including the impairment into account, earnings per share from continuing operations are expected to decline by 50-55%. However, the increase in headline earnings per share from continuing operations will still be 5-9%, Tiger said.
