SA’s largest food producer Tiger Brands will not be increasing prices for its products during SA’s 21-day lockdown, but is grappling with additional costs from containment measures and a weaker rand.
The owner of the All Gold, Tastic and Oros brands said in an update that, with the exception of rice and pasta, it had been able to meet all customer orders for key stock items.
“Unless we experience site closures due to staffing constraints or revised regulations, we anticipate being in a position to maintain consistent supply for the period of the lockdown, as well as through the months of April and May,” the group said.
During the lockdown, additional measures in terms of staff incentives and transport are expected to cost R60m, the group said.
A weaker rand will also affect the import of raw materials and packaging costs, and while this may be recovered through price increases, the effect on consumer demand still needs to be fully understood, the group said.
The annualised effect on costs of a 5% depreciation of the rand against the rates originally budgeted of R15.50/$ is in excess of R600m, the group said.
In afternoon trade on Wednesday, the rand was trading at R18.22/$ — 17.5% weaker than the R15.50 level.
The group also warned shareholders that the recessionary effect of the lockdown, as well as the potential effect of government regulations, prevent unfair or excessive price increases.
Tiger Brands said its supports these measures, but has requested clarity from the department of trade and industry.
Under lockdown regulations, price increases may not enhance profit margins beyond those prevailing for the three-month period up to February 29, a period that included two of the lowest-demand months in the company’s calendar year, Tiger Brands said. It also didn’t take into account a deferral of price increases during that period.
In afternoon trade on Wednesday, Tiger Brands’s share price was down 0.11% at R179.73, having fallen 14.7% so far in 2020. Over the same period the JSE all share has lost 18%.