Archive for November, 2010
Tiger Brands eyeing Ethiopian venture
Independent Newspapers
Michael Fleming, the CFO of Tiger Brands, presents their Preliminary Financial Results at Bryanston in Johannesburg. Photo: Leon Nicholas
Tiger Brands is making headway with its expansion plans in Africa, as it announced yesterday joint ventures with local partners in Ethiopia and Nigeria, which some analysts say is the right approach.
The listed consumer goods company said it would hold a 51 percent interest in a new Ethiopian food processing business through an agreement with the East African Group of Companies of Ethiopia. The business will make and market flour, pasta, biscuits and homecare products, including detergents.
Tiger Brands has also agreed in principle to form a partnership with UAC of Nigeria, in which it would acquire a 49 percent interest in UAC’s food and beverage interests, including branded savoury snacks and dairy products. In addition Tiger Brands has bought 100 percent of Deli Foods Nigeria, which makes biscuits.
Peter Matlare, the chief executive, said that in Ethiopia Tiger Brands was stealing the march on multinational food giants, who were not yet in the country. But he said with the country’s growth and great infrastructure it was expected that the big global food groups would enter the Ethiopian market. By then, Tiger Brands needed to have established a strong presence.
In terms of Nigeria, Matlare said the cost of the deals would only be disclosed once they were finalised.
Sarah-Jane Alexander, an analyst at Coronation Fund Managers, said Tiger’s approach to expanding in Africa was sound as it was through joint ventures with locals, reducing its risk by bringing in local knowledge.
Others agree. Jan Mouton, the manager of the PSG Flexible Fund, said: “They are following a low risk approach by performing relatively small acquisitions and partnering with companies who know the markets.”
Matlare said the businesses in Nigeria and Ethiopia were great opportunities that Tiger Brands would fix and grow. These firms, along with existing African operations Haco and Chococam, could double current turnover of R1.5 billion in 18 to 24 months.
Nino Frodema, a portfolio manager at Metropolitan Asset Managers, said: “We certainly think Africa is a sensible and logical next step as it… can potentially provide Tiger Brands with consistent double-digit turnover growth if executed correctly.”
Africa, and in particular Nigeria, the most populous African state, allowed Tiger Brands to capture some of this massive pent up consumer demand that existed in the fast-moving consumer goods space, Frodema said.
But the risk in Africa was that consumer spending patterns might be very different from South Africa. In addition, a lot of Tiger Brands’ category-leading brands might not have as much brand equity in Africa as in South Africa, where these were a key driver of higher volumes and margins versus competing brands, Frodema said.
Yesterday Tiger Brands reported a 1 percent decline in headline earnings a share to R13.93 for the year to September, and a 2 percent drop in turnover to R19.3 billion. Excluding a once-off tax charge associated with phase two of its empowerment deal, headline earnings would have risen 6 percent.
The company was under pressure due in the period to price deflation in food commodities and a weak trading environment.
The company’s outlook for the year to September 2011 is weak as consumers are expected to remain under pressure.
Tiger Brands’ share price rose 1.09 percent to close at R186. – Business Report
International Monetary Fund (IMF) will give Ethiopia $62.7 million
ADDIS ABABA (Reuters) – The International Monetary Fund (IMF) will give Ethiopia $62.7 million from its Exogenous Shock Facility, the final tranche of a $240.2 million package.
The lender said in a statement late on Monday that Ethiopia had successfully implemented good macroeconomic policies, such as bringing soaring inflation down and building international reserves to about 2.1 months of import cover.
“Inflation has continued to decline, reflecting monetary restraint and aided by favorable weather conditions,” the IMF said in the statement on its website.
“The mild impact of the global recession on the Ethiopian economy has allowed for better performance on the external targets.”
Ethiopia, one of Africa’s fastest growing economies, on Monday said year-on-year inflation was 10.6 percent in October, compared with 64.2 percent in July 2008.
The rate has been generally declining since the government stopped state borrowing and increased bank reserves.
The Horn of Africa country also devalued its currency by 16.7 percent in September, a move the IMF said would bolster Ethiopia’s competitiveness.
The fund forecasts Ethiopia’s economy will grow by 8.0 percent this year and 8.5 percent in 2011.
© Thomson Reuters 2010 All rights reserved
Chinese will open a $67 million leather factory in Ethiopia
China’s Xinxiang Kuroda Mingliang Leather Co. will open a $67 million leather factory in Ethiopia on Nov. 24, adding to the billions of dollars already invested in the East African country by China.
Xinxiang financed 55 percent of the project, with the remainder coming from the China-Africa Development Fund, the Chinese embassy in Ethiopia said in an e-mailed statement today.
Chinese investments in resource-poor Ethiopia demonstrate that it is interested in more than extracting raw materials from Africa, Chinese Ambassador Gu Xiaojie said in an interview on Oct. 28. China’s ZTE Corp. lent $1.5 billion in 2008 for Ethiopian Telecommunication Corp. to upgrade its infrastructure, while other companies have helped build hydroelectric plants, the ring-road around Addis Ababa and the part-completed African Union Conference Center.
“Ethiopia is the best example to refute some of the criticism of China being in Africa only for resources,” Gu said. “It has got nothing, but we are coming to their needs.”
To contact the reporter on this story: William Davison in Addis Ababa via Johannesburg at pmrichardson@bloomberg.net.
To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net
