Nigeria’s Dangote Flour Mills, which failed to make a profit under Tiger Brands’ control, has reported a 10.6-billion naira (R445m) after-tax profit for the 15 months to December 2016.
After four successive years of losses, Tiger Brands sold the Nigerian-based consumer products’ company back to Aliko Dangote for $1 in December 2015. At the time Dangote, who is Africa’s richest man, undertook to inject 10-billion naira to revitalise the loss-making company.
On Thursday, the company said the profit hike was driven by a more than doubling of revenue to 105.8-billion naira compared with 48-billion naira in 2015. During the review period there was a sharp increase in sales of flour, noodles, spaghetti and other pasta products.
The 10.6-billion naira after-tax profit represented an improvement on the 12.5-billion naira loss notched up in the 12 months to December 2015.
“Since the takeover, we have taken a lot of steps to reposition the company through expansion to drive growth,” Dangote chairman Asue Ighodalo said.
He said that as a result of the repositioning Dangote was “stronger, better, sophisticated and more focused”.
CEO Thabo Mabe, who was also CEO during the Tiger Brands era, attributed the return to profitability to strategies adopted by the company to increase market share and create value for shareholders.
In November 2015, in a bid to limit its losses, Tiger Brands said it was withdrawing funding from the unprofitable Nigerian business. A few weeks later SA’s largest food producer said it had agreed to sell its controlling 63% stake back to Dangote for $1.
The R1.5bn acquisition in 2012 was intended to boost Tiger Brands’ growth prospects outside SA, where it was a dominant player in many markets. Tiger Brands also assumed R1.5bn in debt. It was the group’s third acquisition in Nigeria and the largest outside SA.
Fuelled by high oil prices, Nigeria had become the continent’s richest economy. But things turned bad almost immediately in what proved to be an extremely competitive market with considerable surplus capacity. The collapse in the oil price put paid to hopes of short-term recovery following extensive and costly interventions by Tiger Brands.
By the end of 2015, Tiger Brands had notched up impairments and writedowns of almost R3bn. The acquisition not only soaked up financial resources but also management, which struggled to turn the business to account. The Nigerian problems were also hitting the Tiger Brands rating. At the end of 2015, Tiger Brands CEO Peter Matlare, who had driven the Nigerian plans, resigned.
