Tiger Brands withdraws funding from loss-making Dangote Flour
- Tiger Brands attributed the losses to the devaluation of the naira, stiff competition, and slowing economic growth in Nigeria.
Tiger Brands, South Africa’s largest food producer, has withdrawn its financial support for Dangote Flour Mills, one of Nigeria’s largest flour and pasta producers.
The Johannesburg-based company’s latest move comes after it twice wrote down the value of Dangote Flour Mills by a total of $66.31 million. Tiger Brands paid $200 million for a 65 percent stake in Dangote Flour Mills in 2012.
"Tiger Brands has decided not to provide further financial support with respect to its investment in Tiger Branded Consumer Goods plc of Nigeria," the company said in a statement. “Tiger Brands is currently exploring various alternatives with respect to its shareholding.”
In its half-year results released in May, Tiger Brands reported that its operating profit fell 3 percent to 1.7 billion rand (about $120 million) as a result of losses reaching 134 million rand (about $8 million) in Dangote Flour Mills. Tiger Brands attributed the losses to the devaluation of the naira, stiff competition, and slowing economic growth in Nigeria.
“Although Nigeria remains highly competitive and challenging, the Nigerian market offers an attractive source of growth,” Peter Matlare, CEO of Tiger Brands, said in the earnings report in May. “The group is pursuing a number of opportunities which could enhance the future operating income of Dangote Flour Mills, impacting positively on the outlook for the business.”
Matlare will step down as Tiger Brands CEO in December after seven years at the helm.
Tiger Brands’ other investments in Nigeria include Deli Foods, the biscuit producer; and UAC Foods, the makers of the popular Gala sausage rolls. These businesses will not be affected by the funding review at Dangote Flour Mills, Tiger Brands said in a statement.
Chibuike Oguh is Financial Nigeria's Frontier Markets Analyst
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