South Africa’s biggest consumer foods maker, Tiger Brands, will mothball some mills at its Nigerian unit in an attempt to turn around the money-losing maker of pasta and flour by 2016.
Tiger Brands, which also reported a small rise in first-half profit on Wednesday, has been trying turn a profit from Nigeria’s Dangote Flour Mills since paying $188 million for about 63 percent two years ago.
But the Nigerian company, whose half-year pre-tax loss widened by more than 10 percent on Wednesday, is struggling with tough competition, forcing Tiger Brands last week to write down value of the business by 849 million rand ($81 million).
“We are not just going to cut our way into profit, we have to drive revenue growth too and that business by 2016 ought to be breaking even,” Matlare said, adding that new high-margin products could be added to the production line.
He said Nigeria, where Tiger Brands competes with Nestle Nigeria, remained central to its expansion plans despite a low-level insurgency in the north.
“I don’t want to downplay the importance of what’s going on in Nigeria but I really don’t think it’s something that should uncharacteristically gain primary focus, we have to run our business as best as we can,” Matlare said.
Going lean isn’t going to be a magic wand the company needs and I am glad Tiger Brand recognises that. I also like the fact that they are going to be introducing high margin brands to their staple. This will help profits. Dangote Flour Mills remains a risky buy to me