Packaged goods company Tiger Brands has delivered a robust performance for the six months ended March 31, with strong volume growth, a double-digit operating income improvement and a notable return on equity (RoE) improvement.

The company explains that the consumer environment remained competitive for the first half of the current financial year, with continued value-seeking behaviour driving buying patterns.

It notes that the ripple effects of geopolitical uncertainty are expected to be felt more acutely in the second half of the financial year, not only impacting on the supply chain, but also on consumers’ disposable income.

“Management is confident in its ability to mitigate any associated supply risks by addressing the resultant inflationary impacts with additional continuous improvement initiatives and select price increases to minimise adverse impacts to profitability,” the company says.

Tiger Brands says the group’s capital allocation framework, as previously communicated, has been successfully executed.

Since the 2024 financial year, excess capital of R9.2-billion has been distributed to shareholders through special dividends and share buybacks.

In addition, the balance sheet has been optimised, with gearing levels well within the 1.0x net debt-to-earnings before interest, taxes, depreciation and amortisation (Ebitda) guidance.

The company says these initiatives have resulted in year-on-year improvements of 1 000 basis points and 580 basis points in RoE and return on invested capital (RoIC), respectively.

The company says the quality of the group’s topline growth was reflected in the strong normalised volume growth ahead of the short- to medium-term guidance.

On a reported basis, overall revenue growth was 1.3% at R17.9-billion, primarily driven by volume growth of 2.6% and price deflation of 1.3%.

On a like-for-like basis, excluding the impact of discontinued stock keeping units (SKUs) and disposed businesses, normalised volume growth was 4.5%, with price deflation at 1.7%.

Gross margin increased to 32.1% in the first half of this financial year, driven by favourable raw material inputs in key categories, as well as continuous improvement initiatives of factory efficiencies and value engineering savings on recipes and packaging.

The group’s operating income for the period increased by 26.1% to R2.1-billion, driven by gross margin improvement as outlined above, as well as additional continuous improvement savings from logistics optimisation initiatives, which Tiger Brands says delivered ahead of expectations.

Income from associates decreased, as expected, by 84.6% to R52-million, owing to the conclusion of the Carozzi disposal in February 2025.

Net financing costs for the period under review were R35-million versus R15-million in the prior year, which was primarily owing to the increased leverage in line with the capital allocation framework as guided.

Encouragingly, the company says the increased leverage resulted in a more optimised balance sheet, which is reflected in the RoE and RoIC improvements.

The group’s effective tax rate for continuing operations, before fair value losses, non-operational items, and income from associates decreased to 27.6% from 29.4% in the previous year, owing to the withholding taxes on the Carozzi disposal included in the prior comparable period.

Earnings per share (EPS) from total operations decreased by 19.4% to R10.77. Headline earnings per share (HEPS) from total operations increased by 6.5% to R10.

Tiger Brands explains that the variation between HEPS and EPS mainly relates to profit on disposal of the Randfontein operations and impairment of assets in the Beacon chocolate division of Snacks, Treats and Beverages (STB).

On a continuing operations basis, EPS decreased by 35.0% to 949c.

The company explains that the decrease in continuing EPS was driven by the prior year disposals, namely, Carozzi – both the profit on disposal, and the equity accounted earnings for five months of the first half of 2025 –  as well as the profit on disposal of Baby Wellbeing.

The realised profit from prior year disposals was R823-million.

Continuing HEPS increased by 0.6% to R9.80.

CASH FLOW, CAPITAL EXPENDITURE

Tiger Brands notes that closing net debt – inclusive of lease liabilities of R293-million – was R1.7-billion, versus net cash of R5.7-billion in the first half of 2025.

The company explains that net debt for the period was driven by increased leverage in line with the company’s capital allocation framework, and a more efficient balance sheet that has seen significant improvement in key metrics of RoIC and RoE.

Cash generated from operations of R2.4-billion, combined with the proceeds from disposal of noncore brands and the Randfontein operations, resulted in the group net cash of R875-million.

The group achieved a cash conversion ratio of 54% for the first half of the current financial year.

Tiger Brands says its focus on growth and investment in expansion continued the momentum from financial year 2025.

Capital expenditure (capex) for the period amounted to R712-million, driven by expansion capex.

This investment will also provide the capacity for future growth.

The company explains that structural investments, including mega site developments, manufacturing plant consolidations and optimisations, and efficiency capex, aim to capacitate increased competitiveness and step-change the group’s cost leadership journey.

OUTLOOK

Despite what is expected to be a challenging macroeconomic environment in the second half, Tiger Brands says its management remains confident in its ability to deliver performance in line with guidance.

The company reports that short- to medium-term and long-term guidance are unchanged.

In line with its strategic priorities, the company says the second half of the current financial year will be focused on various aspects.

Firstly, the company aims to shape its portfolio as it anticipates conclusion of the Chococam disposal process, and Beacon chocolate property sale as the first phase of the manufacturing site optimisation in STB.

The company also aims to continue to drive Bakeries general trade growth and overall channel mix optimisation and to continue the momentum of continuous improvement initiatives, with strategic working capital management considering increased macroeconomic volatility.

Additionally, the company says driving affordability across the Tiger Brands basket remains a priority, particularly in Grains and Culinary, with an increased focus on innovation for the second half of this year.

Personal Care innovation execution and volume recovery is a second half imperative for growth in Home and Personal Care.

The company says it is also leveraging its focus brands and strength of its combined basket to maximise return on investment with deliberate and effective marketing.