South Africa-based FMCG group Tiger Brands has revealed its business in Kenya saw "manipulation" of its profits in its last financial year.
Tiger Brands this week reported its financial results for the six months to the end of March, when sales rose and underlying earnings were flat year-on-year.
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Within the announcement, Tiger said the performance of Kenyan arm Haco Tiger Brands had been "particularly disappointing" and admitted there had been changes made to the unit's profitability in the previous financial year.
"The performance of the group’s Kenyan business was particularly disappointing. Haco’s results were negatively affected by the effects of pre-invoicing and the manipulation of profits in the previous financial year. Appropriate corrective action has been implemented," Tiger said.
The company said the affair had led to a ZAR108m (US$9.1m) decline in Haco's operating results, which led operating profit from Tiger's export and international division to fall 30% to ZAR234m.
Speaking to South African dairy Business Day, Tiger CFO Funke Ighodaro said: "There was manipulation of numbers – claims were made that should not have been [made]." She added executives in Kenya had "significantly" overstated sales.
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By GlobalDataCEO Peter Matlare added: "All of the corrective measures have been put in place."
Investec analyst Antony Geard said the "massive fraud" was "another blow to Tiger's African dreams".
"The fraud in Kenya is obviously a nasty surprise but is hopefully of a non-recurring nature. But underlying top-line growth of 6% in Africa, excluding Nigeria and Kenya, is uninspiring and again below the rate of growth delivered by the South Africa unit. Last year’s growth rate was 8% and this included the effect of the Kenyan overstatement."
Group sales were up 7% at ZAR15.9bn. Operating income before abnormal items, which included impairment charges or profits from disposals, fell 5% to ZAR1.6bn. Net profit was ZAR1.34bn, versus ZAR602m a year earlier, when impairment charges hit Tiger's bottom line.
Tiger had not responded to a request for comment at the time of publication.
