Good morning, ladies and gentlemen, to all of you who have joined us in person here at the JSE, as well as to all of you who have joined us online. My name is Barati Mahloele, Investor Relations at Tiger Brands. I welcome you to the Tiger Brands Interim Results Presentation for the six months ended 31st March 2026. I'd like to acknowledge the presence of the Chairman of our Board, Mrs. Geraldine Fraser-Moleketi, as well as members of our executive committee who are here with us in person today. Taking us through the presentation this morning will be the CEO of Tiger Brands, Mr. Tjaart Kruger, as well as CFO, Thushen Govender. Before I hand over to them, I'd like to bring your attention to our forward-looking statement. With that, I hand over to the CEO of Tiger Brands, Mr. Tjaart.
Thank you, Barati. Good morning, everyone. I can't be as formal as Barati, I'll just be normal. We are actually quite pleased with these results that we will share with you in the next hour or so. In relatively difficult circumstances, I think the journey that we started a few years ago in Tiger is actually on track, we're moving on. Let's go through. I'll do the highlights and the strategy update, Thushen will do the operational performance, I'll do the outlook at the end, as we normally do. Just some highlights that we have in the business. We're really pleased with the way that we've grown volumes in the business to get back our volume market shares living our promise that we want to make our food more accessible and more affordable to our consumers.
That 5% volume growth is really something we're very proud of, and we've been doing it for about 12 months, 18 months at the moment. Operating income, you'll see in the different businesses, Grains and Culinary specifically, really uptick in margin management and margin improvement. We'll cover later on exactly how those businesses are actually run quite well. Cash returns to shareholders. You've seen the special dividends, the share buybacks we've done over the last while. Significant cash return to our shareholders, which also drives the ROE, which is a significant improvement on previous times. If you look at our focused brands, we disclose that well in this presentation. Our focused brands, you can see how we're driving our focused brands and how the results coming out from that, how the volume growth and how the profitability of our focused brands is growing.
The balance sheet optimization, really a good story around how ROE improved to 26% and ROIC improved to 24%, which is probably close to our medium-term targets that we've shared with you before. Very pleased with the performance around that. There compares to the guidance that we shared with you. The only one where we're not on track, but that's by design, is the revenue growth, where we're deliberately getting our pricing down. There's also deflation in some of the products, particularly rice. We're driving our pricing to affordable levels, and we're very pleased with the volume growth that we're getting as a result of that. That's not sacrificing margin. Margins are improving as well. Very good performance from that point of view. There you can see the ROIC guidance was to get to 20% in the medium term.
We're way above that. Working capital is managed quite well. Gearing, we're not there, but the cash generative nature of the business, a very nice problem to have is to struggle to get to this gearing. That is where we will probably end up being around that gearing of one times EBITDA. The simplification of the business has really tracked well. We're busy with the last few transactions to finalize that. Randfontein has been done. We're busy with the Beacon stuff and the consolidation of the sites in Durban. The King Foods business we probably won't sell because it's actually turned around quite nicely, and it's probably much more part of our breakfast strategy at the moment. Chococam is on track. Everything's been submitted, waiting for regulatory approval. Everything on track where we want it to be. The business is actually performing quite well.
Just bigger picture in South Africa, if you look at our consumer, it is really under pressure, but you can see the deflation that we've seen in rice, and that's impacting quite heavily on our turnover growth. I think what's quite important is the South African shopper. They shop more often, buying smaller basket size, which indicate the cash is not so freely available. We also know that in some of our products, the people buy 80% of those products are bought on promotion. To know how to run promotional activity in the business becomes more and more important. I think our business has actually achieved that quite well, especially the Grains business, to know how to promote and when to promote. You can see it in the results. Unemployment is still a big problem.
If you look at our retailers, you can see the General Trade is growing quite fast. That's why we've got many programs in the General Trade to actually get our presence there. We are there through the independent wholesalers, but we've got specific programs to drive that growth of Tiger in the General Trade. E-commerce is expected to grow. We're in there, quite heavily involved. Then private label is growing a little bit, which is partly, I think, in our categories because of our pricing strategies, and that's what I've said at every presentation here. I've said that private label is a competitor of ours. It's not something else. If we can't compete against private label, we're in trouble. Most of our business is doing quite a good job in competing with private label from a pricing point of view.
You can see that that's good news for us. Supply chain, the volatility with the geopolitical issues in the world, we haven't experienced too much of that. We haven't really got stuff coming out of the Middle East and our supply chain out of mostly China, Thailand, those countries, hasn't been interrupted and we actually on top of it, but it's going quite well. We are looking at working capital, where we have to go probably a little bit longer in certain areas that we make sure we don't run out of raw materials. On top of all of that. Thushen will share with you digital tools and the digitalization of Tiger throughout the whole organization, what we're doing to make the business more efficient. Our strategy remains the same, no changes. We've got those strategic thrusts, and we're working on each one of them.
Cost leadership has probably been the most work the last couple of years. Portfolio's been sorted out. We think we're very close to having what we want to have in the business. We've really started, maybe two years ago, we focused more on just cost-cutting and cost management, and not really looking at big marketing drives, that has all started in the organization now. We're really looking at our big brands and how we build those brands and how we position them. Executing our growth platforms, that's health, snackification, lots of work being done in that area. Superior channels, where we need our products. Most of our products, if not all of them, are consumed by all LSM groups. We need to be in all channels, and we need to be available everywhere. A lot of work being done on that.
Enabled by, and I'm just going to cover one and two, it's igniting our people and driving the operating model. You could combine that to say driving the right culture in Tiger, where we know what we need to do, and we actually execute on that. That culture in Tiger is really developing very well. Within that comes that we have to innovate digital capabilities, competitive manufacturing, but it's in that whole overarching drive of the culture of the organization, and we're making great progress in that. Our strategic ambitions is what we've spoken about, where we want to come from a profitability point of view, a margin point of view, return on invested capital, and then obviously we want to be an employer of choice, the culture I spoke about.
This strategy is what we've shared with you two years ago, and it hasn't really changed. We've just progressed very well in all these areas. My last slide on this section is really Tiger at a glance. You can see our five businesses here, and you can see how we have the best brands that you can have in these categories. There's one brand that you can see where we saw there be the second equity brand is Crosse & Blackwell. We've already got back into market leadership, market share. This is equity share. I think we'll get back to number one here soon, as well. In all these categories, we've got the best brands that you could have, and it's our job to manage those brands appropriately so that we can generate the right returns for our shareholders, which is what we're busy doing.
Great business if you look at this slide. In each one of these categories, we've got the brands that we need. We're very proud of these brands, and I think the comment that I've made previously is these brands actually belongs to the consumers. It's not ours. It's just our job to make sure they're relevant to the consumer. With that, I will hand over to Thushen.
Thanks, Tjaart. Morning, everyone. Tjaart did touch on the journey to date. I thought it's worth just focusing on some of the key elements behind our shareholder value creation journey. The three key pillars of this was, of course, the portfolio optimization, ultimately freeing up cash to return to our shareholders. Then optimizing the consequential result has been the optimization of the balance sheet. On portfolio optimization, you've seen our journey over the last two and a half, odd years. We exited non-core businesses such as LAF, Carozzi, the Baby Wellbeing transaction. What this has ultimately done has allowed management the opportunity to focus on core operations. You've seen the results that are coming through as a consequence of that strategy. Tjaart referred to the Beacon business. We've just signed an agreement to sell some of the equipment related to chocolate slabs in the Easter range.
You would also notice in the P&L there's an impairment on those assets. However, if you read through our earnings statement, you'll see that we've also sold the associated land and buildings, and on an annualized basis, we expect to see a profit from that disposal. Land and buildings, including the equipment. With this surplus cash, over the last few years, you've seen us issue special dividends to the extent of ZAR 5.8 billion and buybacks to the extent of ZAR 3.4 billion. I'm stressing on that billion because these are record numbers, and I hope the market appreciates that. Ultimately, with that surplus cash handed back to shareholders, you've seen the benefit in our balance sheet and our return on equity and our return on invested capital improve to those numbers you see on the board.
Not so long ago, in 2024, those numbers were in the mid-teens and actually hovering below, return on invested capital was below our cost of capital at that time. It's been a phenomenal journey to see these strategic initiatives come to fruition. In the last two or three presentations, we briefly touched on the digital transformation that's going on at Tiger. We thought it's worthwhile to give you a broader picture so you can appreciate when those buzzwords like AI, digital come up, you can appreciate we are applying ourselves to this and it isn't something that we're waiting to put out the fires and then we'll get there. We're actually very much well-entrenched in our digital strategy. The first phase was obviously to fix the data. We had inherited decades of data.
There were no data rules, there was no data hierarchy. We spent the last two or three years fixing the data. Obviously, if that foundation is not solid, you aren't going to be able to leverage that into the future for AI or any shape or form of management reporting that makes sense. Whilst we did that, we had some quick wins as well. We had the introduction of Workday, which has improved our employee experience, which has allowed us to improve our recruitment practices, our training and development. We've launched the supply chain control tower. I think over the last two years, you've seen the benefit come through from the logistics synergies. We've launched our SAP forecasting tool. Historically, about 1,500 SKUs was forecasted on Excel.
This tool has some sophisticated algorithms, allows us to manage demand prediction better, but more importantly, the IP sits within a system as opposed to an individual and de-risks Tiger as a consequence. The other tool that we brought in over the last two years was our procurement tool. Historically, this was done via phone and email. We now have the ability to log suppliers' data on a system called Zycus. We are running e-auctions, we are automating the PO settlement, and it's really assisted us in efficiencies. I think I mentioned as well the bakeries' route to market software, and I'll speak about that later on when we get to bakeries.
Phase II, which is in progress right now, is essentially taking all these various systems that Tiger has, including external data sources, and merging it into a data lake, obviously with the right governance, the right rules. This will ultimately allow management to essentially deliver management insights with the appropriate reports and dashboards from external and internal data sources. We've also launched a Digital Transformation Committee. This committee is not just a think tank for Tiger. It allows us to, in a very considered manner, look at AI opportunities and focus on this and see if there are any opportunities in which we can improve the supply chain even further. I want to stress on that word "considered" because AI has become a really big buzzword, and we aren't convinced until we find that the solution gives us a tangible return on investment.
We're going to manage this AI journey with great care and caution, and if that's the only message you take away from this slide, it'll probably be the most important message. Then phase III is about OT, the operational technology in our plants, merging into our IT systems and getting to the point where we can have predictive maintenance across our plants, as well as monitor operating efficiency of our equipment. With the new Super Bakery, this is going to form the foundation of that thinking, and we've already progressed to that level where we have sensors across the line to monitor these various aspects. This journey is well underway, and as I said, we're going to manage it responsibly with the appropriate governance. What's exciting about it is we're already starting to see the benefits that I talk about.
With the shared services automation, we've identified 150 manual instances or tasks which we are in the process of automating. In time, we see this delivering a competitive advantage, but also delivering to management accurate, timeous reporting. As Tjaart mentioned, this is a really great set of results. You see revenue slightly muted as a consequence of the rice deflation, but the operating income and operating margin, in our view, is fairly spectacular considering the trading environment we see in the marketplace. The operating income that you see and the margin that you see is as a consequence of the various initiatives we've been speaking to you about. Value engineering, that's on our packaging, our recipes, lightweighting our packaging, driving the logistics efficiencies, which I've been speaking to you about over the last two years, and then ultimately being obsessed about growth and affordability.
It's not just the affordability, it's the growth as well, and you've seen that coming through in our volume graph that I will get to. HEPS and EPS I'll cover just now in the coming slides. Then on working capital, you'll see this is extremely well managed and within guidance as well. It's probably worthwhile talking to this for a few minutes, and one of our directors aptly said we should take the noise out of the system, the IFRS noise. My apologies to Deloitte in advance. I think this does give you a good picture of how the core business is performing. If you remove Carozzi and Wellbeing that sits in the base, the equity accounted earnings, as well as the profit on disposal, we've actually grown EPS by 21%, and that's on the core business performance.
What you will also see coming through there as a consequence of our balance sheet optimization is the net finance costs of ZAR 105 as we're starting to see some gearing now come through in the balance sheet. Very similarly on HEPS, taking those same account adjustments into account and the equity, the consolidated earnings of Carozzi that sits there, you will see the normalized HEPS that's on core operation has actually grown by 24%. I think it's important to bear this in mind, and I made the point right up front as well. With the disposal of the non-core portfolio, it's not only freed up the balance sheet and optimized return on equity, it's allowed management to focus on core operations and deliver the results that you see before you. This is the volume growth I referenced up front.
Our obsession with volume growth and affordability goes hand in hand. It's absolutely critical that we continue to deliver our great-tasting products at the right quality and at the right price point to our consumers. When we get that price point right, this is what you see as the result. The reality is, Tiger does have an unfair advantage. When you look at our stable of brands, no other company in the country has that many brands that we do have across FMCG food and bev in particular. The major contributors to cash for the period. As you can see, interest coming through here as well. I think the big call-out on this particular slide is this. We've paid out a record dividend, the ZAR 5.7 billion, of which ZAR 4 billion was the special dividend. We've bought back shares to the tune of ZAR 1.6 billion.
Despite all of this activity, Tiger remains highly cash generative and still under-geared relative to our guidance on our target debt levels of 1x EBITDA. I think this slide says a lot about the strength of our operations and the cash generative nature of that operations. It's a good problem to have, targeting a debt number that you can't quite seem to achieve because you just spurn out so much cash. On CapEx, as you can see, we're improving on our ability to execute projects. We've resolved with the federated model, the bureaucracy that historically existed in the system. CapEx projects are managed by the business units themselves. There's a lot of rigor in the process. There's the appropriate delegation of authority and sign-offs for the different levels of CapEx spend.
Ultimately, we found our rhythm, and as you can see, that number is significantly ahead of the prior year. The Mega DC that I referred to late last year is on track in Gauteng, where we're consolidating our various secondary DCs in our network. We're also applying our mind to what that could look like in KZN and in the Western Cape, and in the coming months, we'll come to the market once that plan has been approved. The Super Bakery is on track. I'll touch on that a little later. The mega site at Paarl is well underway as well, and I'll cover that in the Culinary slide. On Milling and Baking, we've always mentioned to the market that there are certainly opportunities to improve this business as we build the Super Bakery.
The Super Bakery is going to step change our competitive advantage given the cost to produce a loaf out of that super site, so to speak. However, in the interim, with the existing manufacturing platform, we have found opportunities to incrementally improve our profit, as you can see in front of you on that slide. The team have looked across the value chain, whether it's conversion costs that take into account labor, damages, waste, or whether it's the route to market, rebalancing our channels to be more GT focused. Every one of those opportunities are being considered. You'll see that benefit coming through in our operating income growth. The reality is we didn't sit by and wait for that Super Bakery to come online. We found those opportunities to turn around the existing operations where we could. As you can see, it's been quite a lucrative process.
The other thing to bear in mind is the route -to- market software that we've referred to in the past is now well embedded across all of our bakeries. Remember, in the early days, it does increase the cost to serve as you establish your routes. You'll have to find the best route with the most optimal drops, the most optimal stores you'll have to service, the highest number of loaves per customer, the least amount of kilometers traveled to deliver a loaf, the least amount of returns, and all of those KPIs are currently being assessed before we concretize a route. In the early days, there's some investment required to adopt the software to make sure that our drivers adhere to these routes, and in time, we'll get better at it and tweak as opposed to intervene as we go along. We spoke about the Super Bakery.
It's really an impressive kit. It has all the capability that I referred to essentially automated processes that allow you to look at operating efficiency, that allows you to assess whether any particular component needs replacement, and it's really state of the art. I do think it is the largest bakery that's being built right now in the Southern Hemisphere. It's a phenomenal project, and we look forward to seeing it come online later this calendar year. Grain has really had a spectacular few months, and I think it's a track record that's held true over the last two and a half years. The team have done exceptionally well. The revenue that you see before you is muted as a consequence of the rice deflation that Tjaart referred to, but the operating income has really been a stellar performance for numerous reasons.
The operating efficiencies, given the team's focus across the supply chain and in the factories, as well as value engineering of their packaging. The other important thing to probably take into account in this particular period, we've seen the entire portfolio deliver an exceptional result. On pasta, we had hit capacity. We reduced the number of SKUs to service the market more profitably and signed off on new CapEx to invest in pasta capacity. That pasta business had had a really good six months. Jungle, historically, which is really mainly and currently on an oats platform, was seen to be a winter product. The team did great work around price elasticity relative to cornflakes, relative to wheat biscuits, and they've managed to find the right price point during the summer season that allowed our consumers to include the oats in their shopping repertoire for breakfast products.
We've seen a phenomenal turnaround in the first half on the Jungle business. As Tjaart mentioned, the King Foods business has really had a great six months. It's a notable performance with the turnaround. We're now considering that as part of our broader innovation strategy in breakfast. On the screen, you'll also see the new cornflakes that's probably going to be in market in the next couple of weeks, Liezel, or in market already. We've managed to resolve our supply chain challenges, and we have a really great product that we think our consumers will enjoy. Watch this space. There's quite a few other products coming through to market, and there'll be a porridge soon under the Jungle brand as well.
Really good innovation to create a broader portfolio, not just rice-dependent breakfast, pasta as well, and in the first half, you've seen that strategy come to the fore. Tjaart referred to the geopolitical volatility. This rise comes from the East, and obviously, we're going to manage those supply chains with care as we deal with the Middle East crisis or as the world deals with the Middle East crisis. It's been really good to see this business grow from strength to strength, the Culinary business. They've delivered consistent results and hold some of the best brands we have in our portfolio. This business has had a head start with regards to the value engineering, whether it's packaging innovation, recipe innovation, or just generally the conversion cost efficiency with the time and motion studies that we had embedded at our facilities.
It's nice to see the margin progression, the operating income growth. In fact, our Chief Customer Officer, Luigi and I, were at one of our big customers earlier this year, and as we walked in, they looked at us and said, "Well, what is it going to be this year? You short of caps, you short of eggs, or you short of vinegar?" We are pleased to say none of the above. We've managed to resolve those problems. We've now appointed one of the largest suppliers of closures in the world to supply Crosse & Blackwell with closures. We now removed most of the egg from the recipe, so the avian bird flu is no longer a concern. Thirdly, we've insourced the vinegar. We've addressed these challenges and hope to bring more stability to the business.
The baby nutrition business has also had a great run under the Purity brand, with pouches in particular. We had to commission a historically mothballed line, given that we were growing the business at a spectacular rate. It's really good to have seen that performance. The international markets are becoming increasingly meaningful in the performance that you see here. Our neighboring markets are starting to grow their basket with the strategic distributor model in place, and our sub-Saharan African brands, Benny and Jolly Jus, is doing phenomenally well. It's really been a great performance across all channels and markets. The Paarl Mega Site is already on stream. We've migrated the jam from tin packaging to PET. We've insourced the vinegar. That will be commissioned by end of this fiscal. We've insourced chutney production, which was historically with a third party.
The plans on innovation and delivering mega site efficiencies are well on track, and you'll see in the second half the team bring to market Black Cat Creamier, which is part of our product tiering strategy in order to reinforce affordability for our consumers. Snacks, treats, and beverages. Slightly muted performance on the top line. We must appreciate these are discretionary categories, and our consumers are experiencing very tough socioeconomic conditions. However, managing efficiencies, whether it's at the factory or with logistics and managing our procurement better, we're able to expand margins as well as due to the product mix. The Jungle bar is now, I think, in the top three count lines in the country. It's performing exceptionally well, and that's also helping the profit mix. Oros Ready to Drink has started to grow, and we're starting to see traction there.
There's investments for cold availability, which will further drive the expansion of our ready to drink portfolio. Ultimately, we've also seen some benefit from the reduction in orange concentrate, which has allowed us to expand our margins. We spoke about the Beacon disposal. That's going to enable us to consolidate three sites under one in Durban and step change our conversion cost per unit in the right direction, of course. We're also on track with our primary warehouse at our Roodekop facility. We've appointed a contractor and hope to open that warehouse at the end of next year, which will drive further savings for us given the current logistics inefficiencies of transporting product to our Yardwing site and then redistributing to customers. With this primary warehouse at the site, we'll be able to deliver direct to customers and see that benefit of the logistics costs.
This is my last slide, ladies and gentlemen, then I'll hand over to Tjaart. As you can see, this business has had some challenges over the last six months. Profit growth fairly flat, it's really as a consequence of three things. The pest business, I will cover those three things, and I'll let you know what we're doing about it, because I think that's the important bit. What are we going to do about it? The pest business continues to be exposed to weather patterns, as we know. If you have a very wet summer, you're not going to sell that much Doom, and there aren't that much mozzies in the air. That's the reality. It is a seasonal business.
What we're doing about it, we're expanding our presence into the neighboring countries where the climatic conditions are more suited for this product all year round, and there's less seasonality impact to the business, and that's going quite well. The international team is growing the markets, neighboring markets, and Zambia in particular. Botswana, Namibia remain opportunities as well, and we continue to activate and drive the pest category in those regions. The other challenge we faced was we sold off quite a few brands in personal care, and we sold the Baby Wellbeing business. The reality is that has left some costs behind. What we're doing about it, we've come up with a plan to remove all of those costs, and I'm pleased to note, as of the first half, we're on track with that cost reduction.
That's what you see coming through in the operating income holding despite the revenue decline. The third issue that we faced was Ingram's has been historically a camphor-based product, which has lost relevance with our consumers, which is typically a winter product. What we have done now is relaunched the product, expanded the offering to move into functional creams to reduce the exposure to camphor cream. This product has just got finding itself in the market now. We're confident that the second half will be much better on personal care and that the product offering is now suited for where the market has moved. Thank you, ladies and gentlemen. I will now hand back to Tjaart.
Thank you. If you look at the slide, this is probably the third time we're showing it, but just to get into the future. If you look at where we're really going with the organization, the simplification, we've kind of simplified the organization. I think our big challenge now is to make sure we don't lose control the other way again, and that we have to do this again in a few years' time. We're there, and we must make sure that we focus on this organization as a simplified business where we pump big things and not fiddle around with stuff that doesn't make a difference. Our cost leadership journey is something that I don't even think we're where we want to be with cost leadership yet.
We've still got some way to go. Cost leadership is probably something that you will always have to drive, drive, because we need to attack costs all the time, and that's what we will continue to do. Growth initiatives, I think if you look at the structural investments that we're making, there's quite a few very exciting things that we're doing in the organization. The Mega DC, the Super Bakery. I think we're probably into a second Super Bakery not too far into the future. The mega site in Paarl. I think we've got some opportunities in Gauteng for some mega sites, maybe around the pasta facility, maybe around Potch.
We've got lots of opportunities to make sure wherever we expand the organization, wherever we build new factories, we try and do it where we have factories, so we can build scale, we can build this mega site benefit that gives you huge cost and overhead allocation benefits. Going into the future, I think we're actually well-positioned now to do that and to continue to do that. Some priorities for the second half of the year in all the different businesses. I think if you look at Milling and Baking, it is such a tough industry but such a good industry if you get it right. That we've embedded a lot of basic things, and we must just make that work well now. The guys are really on track with that general trade, driving hard to be better and better in the general trade.
The reason why it is so attractive to be good in the general trade, because it's not easy. If it was easy, everybody could do it easily, it's not such an attractive thing to have. Really working very hard on doing that. The Super Bakery is obviously a big number. It's a big project. Lots of moving parts. I think it's over 200 containers that's coming into that site to deliver equipment. There's not even place to store about 20 containers. You can imagine the logistical challenge we have over the next couple of months. Grains. I think it's a great story in grains. It's just to continue to do what we're doing well. I think lots of opportunities around Jungle, how we drive what we want to do around innovation, and lots of stuff in the pipeline. It's really great opportunities.
I think the one big thing is strategic price points that the guys got right in grains. It's really knowing exactly where you must run a promo, how you put Tastic into a combo, how you put whatever we have in the portfolio into combos. I think the opportunity going forward is driving price points and driving combos between these businesses. We don't only have to do it within a business, we can do it between the businesses, and we're doing quite a lot of work around that. Obviously, procurement is a big issue in grains because it's a big number of your BOM is the raw material. Liezel just came back from Thailand last week to really understand the supply chains of rice around the world, because you need to understand it extremely well to be able to do it.
Driving snackification, that's probably Jungle brand that will drive that. Culinary, great work over the last while. Great opportunity still to come. Key innovations in spreads, the Creamier that Thushen just mentioned, that is probably going into market in the next week or three. That will give us another price point, it will give us another competitive edge, and big excitement around that. In all the other areas, it can probably happen as well, mayonnaise and tomato sauce. Lots of work still on value engineering. I think mayonnaise will go into PET later this year. Really looking at that gives us the opportunity, maybe a tiered product in mayonnaise as well to give us real opportunity on price points. Manufacturing footprint in Culinary. Some of these mega sites are in the Culinary business. Davita , which is dried powdered, lots of innovation happening there.
The Paarl site, lots of opportunities. A big part of the Culinary business is in the export portfolio, Mozambique, Zimbabwe, all the countries around us. I think we're focusing on getting much smarter in terms of what we do in the export market with the portfolio that we have. Snacks and treats. The biggest issue in snacks and treats is probably the site consolidation in Durban, a very complex project. Remember there we're trying to change the Boeing's engines while it's flying. It's a very complex situation, but the guys are on top of it. I think it's going well. All the stuff of selling the equipment and selling the brands, and selling the sites, that's all in place. It's all on track. The next couple of months is very critical in terms of making sure we don't drop catches around that.
Beverages, great job the last couple of months. It's a category that's maybe sometimes under pressure, especially if you look at the big guys busy maybe with a little bit of a price war, the carbonated guys. We've got good positions in our products and our brands that we can really drive that business. Obviously, this is the one category where the classical innovation that we refer to is probably the most relevant and the guys are working on that. Price point management. Remember, Oros is maybe it's consumed through all LSMs or probably more so in the lower LSMs. We need to have the right price points, need to have the affordability that's required. The completion of the Beacon sale. Home and personal care. I think Thushen covered that.
We're right in the middle of a relaunch of Ingram's to get a way to get a position, not only in camphor, but around creams, much wider. New packaging, better value proposition. That is really going into the market right now. A big part of this business is also exported and lots of work being done in the neighboring countries. Some volumes to recover. You see that was the one business where our volumes declined slightly. We've got work to do around that. Continuous value engineering. I think Thushen covered that. The guys are on top of cutting out all those costs. Our short- to medium-term guidance, we're keeping that the same, and you'll probably say, but you're over the 20%, and we are. We're closer to the 25% on the longer-term guidance.
We'll probably adjust these numbers in due course, but I think if you look at the guidance going forward, it's more of the same. We're really driving these returns of very disciplined capital allocation model that we have. We're driving balance sheet efficiency, and we're driving margins in the income statement, and we want growth. I think we're well on track to deliver on all of those. Thank you very much. I think it's question time. Thank you. No questions?
Thank you, Tjaart. Thank you, Thushen. Okay. I'll probably start here in the room. If we have any questions, we do have the mics going around. Just a reminder, please, in the room, as you ask your question, just introduce yourself and just remind us which institution you're from. If we can have a mic here, please. Okay. Thank you.
Hi. Thank you. Lwando Ngwane from All Weather Capital. First of all, I just want to congratulate you on the execution you've been able to sort of get through since the new strategy has been officially on. Tjaart, I have a question around the King Foods business. I think it was one of the first businesses you sort of flagged as you would be looking to sell, and now you're sort of telling us that you will be keeping it because it's performed well. Maybe can you just expand on what's changed in terms of that business? I'll have a follow-up once you've answered that.
I think the cynical answer is it's funny how something becomes core if it makes a lot of money. That is not the answer, though. I think what we said initially is that the King Foods business, we did lose our way a little bit in that business. Maybe not a little way, a lot. The King Foods business is into making ingredients that's for brewing traditional beer. That's a big part of that business. Over the last number of years, Tiger tried to move it a little bit away from that into that extrusion capability there to make Morvite comes out of that plant that was developed 30 years ago. The whole mix and profitability of the business wasn't quite there. Our strategy a couple of years ago was to develop that whole breakfast strategy of ours.
Maybe in Isando where we've got a pasta plant and there's lots of space there. The plan was to develop that whole breakfast portfolio of us there. With the work that's happened over the last two years in getting the fundamentals of that business right. Look, the one thing we've got there is a raw material, sorghum, which is an ancient raw material, and it's part of the growth platform and part of the health platform. You'll see in lots of these health shops, they talk about ancient grains, which hasn't been bred, which means it's very pure. People are very scared of genetic modification in grains. That's what sorghum has. It's an ancient grain. It's a wheat, actually, but it's an ancient wheat. It's got a great health connotation to it.
With this change in the fortunes of the business, we're very comfortable now that it will probably be cheaper to develop our breakfast strategy in Potchefstroom because Potchefstroom is probably cheaper than Isando as a destination. We've got lots of space there, and to move equipment is going to be expensive. I think we're very happy to change our mind around having those learnings over the last year or two. We'll just drive the business that that ingredient part of the business that's for traditional beer brewing will become smaller and smaller and smaller as we grow the business of the rest. All the other capabilities are in Potch. It's actually a very nice site. We're very comfortable that we can welcome it back into the portfolio.
Okay. Thank you. Just a last question on the raw material procurement, if you're able to share. Of course, we've seen logistic costs start to come through. The soft commodity prices, especially where you're exposed in terms of grains, have fallen quite nicely year to date. Maybe can you speak on how you're covered in terms of those soft commodities?
Yeah. If you look at grains, the biggest traded grain in the world is wheat. Now, we're out of maize so that's not relevant. If you look at grain production in the world and grain supply and demand in the world, we've got ample grains everywhere. That's why the wheat price is under pressure. Wheat price is quite low. The rice price has been very low. I think it's going to probably go up a little bit now, but there's ample supply of these raw materials around the world. Those farmers are price takers. They're not price makers. It's supply and demand that determine the price. World grain prices are actually relatively low at the moment despite of the geopolitical problems in the world. It hasn't got an impact on that.
If you're a farmer with a silo full of wheat, you must sell the wheat because the next year's crop is going to that silo. If you don't have the silo empty, you can't harvest the stuff that stands on the land. It's supply and demand. There's lots of supply, so the prices are under pressure. We don't foresee that changing in the immediate short term, but we do start hearing now, or what we not hearing, we know is there's a threat of El Niño coming next year. They reckon the El Niño is very similar to the 1982/1983 El Niño, which was quite a bad El Niño, and the crops actually struggled quite a bit during that time. You've got the geopolitical stuff that caused fertilizer prices to double, fuel prices to increase, which are huge input costs for farmers.
A farmer doesn't have the capability to say, "My input cost has gone up, so I must increase the price of my flour that I'm selling or my wheat," because it doesn't relate. The wheat trades on supply and demand. If there's lots of wheat, the price is low. Farmers are under pressure this coming season to start planting summer grains, which is in the next couple of months. It hasn't started yet. We don't see big movements in grain prices. It's on the low side, which is good for us, good for the consumer. We are very on top of the whole movement of things, how we procure, and we don't take big bets on procurement, but we procure that we're well covered so as we know what our selling pricing should be. It's all good.
There's no big threat on that rice prices are going to increase 40% or wheat prices are going to increase 40%, and now the consumer can't afford anything. Those threats are very limited.
Thank you. I'll take one more question in the room before I go to the online questions.
Thank you. Shaun Chauke from JP Morgan. Two questions. One, it's a statement with a question that's coming after. It's refreshing to see no change in guidance despite all the concerns out there in the world. My question. Based on the initiatives you've stated, it feels like you now become immune to the impact in terms of what's happening out there because of the offset as well from your initiatives. Can you please elaborate more on the play here and what could derail the plan in the short term?
What could derail the plan in terms of our turnaround strategy?
Yes, in the short term.
The journey that we're traveling on?
I.e., if you look at your base in H2 last year, it's much more cleaner. Do you still think you can deliver double-digit earnings growth on H2's base? Thanks.
I think if you fix the base like Thushen did in those slides, I certainly think so, yeah. It normalizes it. Carozzi is up in the second half of last year and the Baby Wellbeing business, neither. So, it should be a much better base to compare with. I think our guidance stay where it is. We're still very optimistic with the journey that Tiger's on. I think we're probably not talking about a turnaround anymore. I think it's probably been turned around. We're talking about our growth agenda going forward. That growth agenda going forward, delivering superior returns for shareholders is based on doing the stuff that we've done the last two years, continuing to do it well. That, talking about cost management, becoming more efficient. There's still lots of opportunities in Tiger Brands to be more efficient.
This digitalization Thushen is talking about, it's not to get sexy, it's to get more cost efficient. That's the biggest benefit from all of that. Just the ability to take decisions much quicker, the ability to not to have manual credit notes. All those type of things just create so much value in the organization. On top of that, we're getting to the point now where we can really get into the growth vectors in terms of innovation into various things, that we can grow the portfolio but not make it more complex again so that we sit here in three years' time again with 20% or 30% SKUs that has to be cut out.
We're trying to get into our innovation philosophy that you put new stuff in, take some old stuff out, so that you keep the simplicity of the business intact so that you can run at a very cost base. We absolutely, you must watch this video outside of the new brand and how the new logo has been developed. There's quite a bit of science behind that, and that's really what we want to live by. We really want our customers, our consumers to be able to afford our products. We can't do that if we want to charge 20% premiums because we think we're worth it. We're not worth that much.
Thank you, Tjaart. If I go online, Tjaart and Thushen, I'm actually combining three questions because they're quite similar.
Can you ask the question for him now please?
Okay. Thushen, this is around fuel prices, and these questions have a similar theme.
Tjaart can take that.
The question is, what is the anticipated impact of the fuel price increases, and can you tell us the impact to the P&L? An extension of that, what is the level of pricing that would be needed to offset the increased input costs?
We've obviously analyzed the impact to the P&L, not just our outbound logistics for Tiger, that's DC to customer, but also taking into account the bakeries. Remember, as we increase our presence in the general trade, that's going to be quite a few more routes, and as a consequence, a lot more fuel utilized. We anticipate that number to be in the region of about ZAR 25 million a month, the on cost as a consequence of the fuel increase across bakeries and the broader group. There are a few initiatives underway. On logistics, as you know, we've started this journey on optimizing our turnaround times, our backhaul efficiencies, optimizing stockholding at the various regions to ensure we're not carting the wrong product up and down across South Africa.
With that focus, we think we can mitigate an extent of that fuel price increase, as well as what Shaun referred to, the broader continuous improvement plan that we have for the second half. We've intensified some of those initiatives. Also, important to bear in mind before we even go to market with a price increase, which we want to manage with great care given the affordability focus. We can manage our promotional activity and our discounts a lot better as well. With all of those initiatives, we believe the impact to the consumer from a Tiger Brands perspective will be quite muted.
Thank you, Thushen.
I think it's important to say, those decisions are made in the various businesses. We can't tell Dumo how much he must increase mayonnaise by because he had an oil price increase. He's supposed to do that himself. He has. Those decisions are made in the businesses. We've taken price increases in quite a number of categories that we operate in appropriately. It's not only fuel. Oil has gone up quite a bit.
Mm-hmm. Edible oils, that's right.
Yeah.
Yeah.
Thank you, Tjaart. One final one online before I come back to close in the room. Congratulations on these results. Can you elaborate on how you plan to get to your leverage target? What is the outlook for rice prices globally? What level of product inflation is optimal for the business?
Was that for me?
You want me to cover the leverage and then you cover rice?
Yeah.
I think with great difficulty. I put up a slide on our highly cash generative business. We said to the market that we would look to achieve 1x EBITDA in terms of our gearing. We paid out a significant amount of special dividends and share buybacks, and as you can see, we're still well below that target. We continue with a very intense capital investment cycle, but we're also confident that that's not going to increase the gearing significantly. There are various options at hand. Are we going to look at another special dividend in about another year or so? There's opportunity to continue with our share buyback program considering where the share price is right now. It's not going to happen overnight, but over the next 12-24 months, you'll see us keep closer to that target. No?
Yeah. What was the second question?
The rice pricing
The rice pricing.
Yeah
Yeah
the supply chain associated with that.
I think Liezel told me this morning that there's a upward move in rice prices. It's not significant. What's important for us is that if there's a difference in rice prices out of the various origins like India and Thailand, you must make sure you get the balance right so that you are competitive on the market and on the shelf. There's maybe a little We've probably seen the end of the heavy deflation in rice. It's probably going to be flat or increase a little bit going forward. If you look at supply chain costs, we haven't really seen increase in shipping costs out of where lots of our stuff come from t he shipping lanes are competitive. The pricing actually remain quite stable. If you look at the oil price this morning, it's down to $93.
The rand is strengthening. You might see a decrease in diesel next month. Not close to where it was six months ago. I think we must be careful not to overreact on these things. We must really be aware of what's going on all the time, and we are. We check the shipping lanes, we check the shipping costs. They're doing great work in trying to combine inbound logistics with outbound logistics because we're exporting some grains in South Africa. We're trying to export a lot of the surplus maize we have in the country. We work with those guys to try and get a return load like we do with our trucks. If you can organize the return load, you obviously share in the benefit of the costs. All those things I think are well managed, well under control.
We don't see big movements in pricing required. Where we have to take them, in mayonnaise, we took quite a significant price increase because of the increase in edible oils, because that's a big part of the recipe in mayonnaise.
Awesome. Thank you, Tjaart. Final question in the room before we close for today.
Hello. Talya Ginsberg from Umthombo Wealth. If I could ask two questions. I'll just start with one first. You've spoken about how you've expanded overseas. Zambia, you've given us an example. In terms of an expansion as an expansion strategy, you'd know more than me. You'd have in South Africa, your formal market, your Shoprite, your Pick n Pay, I suppose how we'd shop. Your informal, I think it's called Main Markets, which is probably as a value, it's more or less valued the same. If I'm not correct. As I said, I imagine you'd know more than me. Are you going to use the informal trade as a way to expand in South Africa?
We can't choose one and not the other. I mean, the formal trade, the Shoprites. If we don't trade well with Shoprite and grow with them, we can't grow our business because they're so big. All the channels, the formal retailers, the out-of-home channel, the export channel, the general trade we call the bottom end of the market. That's the old ugly word, bottom end of the market. The general trade, the township economies are so strong, and they operate in a very different way. If you're not in there and understand it, you're going to lose on that. We want to grow in all those channels. You have seen in the most recent past that the informal channel or the general trade channel has grown a bit faster, but they are actually quite much smaller than the formal retailers.
Oh.
You have to have the right strategies and the right pricing for all these channels. You can't give anyone a much better price than the other one because that's uncompetitive to start off with. They watch it. If I walk into Shoprite's office, they throw all the Boxer leaflets in front of me to tell me, "Where do you get these pricing from?" Vice versa. You have to manage all those channels. I think because we are big, we've got big market shares in all the channels. We've got big market shares in all the categories that we operate. I think we do have the capability to actually operate in all those channels and strategically do what needs to be done in all those channels to make sure we get to the targets we're looking for.
All right. Thank you. My final question. Rice has been mentioned quite a lot. Obviously, the petrol will be going up. Is there any other soft commodity such as wheat, that you have seen rising or you suspect will rise?
No. The wheat, it's not rising. We're seeing a little bit rise in rice. Wheat prices are not really rising. Remember, if wheat prices gets too low, we get an import duty to protect a base price for farmers. Wheat prices has risen a little bit. Those duties have fallen away. I don't see. As I've said earlier, it operates a little bit different. Over time, if your input cost increases a lot. Farmers will plant less because they can't afford to plant, or they don't make profit, or they go bankrupt, whatever. If you look at wheat production in the world, it's actually quite good. We've had two, three years of very good crops around the world. Russia, Ukraine. North America, Canada, Australia. That's where a lot of our wheat comes from. There's a lot of wheat in the world. I don't foresee a massive increase in wheat prices.
Okay. All right. Thank you.
Thank you so much. Thank you to all of you joining us online. For those of you in the room, on your way out, you'll see one of the innovations that Tjaart and Thushen spoke to earlier, new Ingram's launch. Please do help yourself to a bag. Thank you very much. Travel safely.