Tiger Brands | Annual Financial Statements 2022

Annual financial statements

Impact of product recall

COMPANY				GROUP
2022	2021		(R'million)	2022	2021
		3.1	Impact of product recall
			During the fourth quarter of the 2022 financial year, a product recall was initiated on certain Baby powder products as a precautionary measure. Trace levels of asbestos were detected in test samples from a batch of pharmaceutical-grade talc powder used as raw material in the production of finished powder products. The defective raw material was identified in August 2022. The decision was made, in the best interest of consumers, to recall all Baby talc powder products from store shelves and from consumers. Approximately 281,9 thousand units are estimated to be destroyed, of which 68,5 thousand units are estimated to be recalled from the trade.
			During the second half of the 2021 financial year, a product recall was initiated on selected canned vegetable products within the Groceries business over safety concerns linked to defective cans. The details of the recall are disclosed in the 2021 financial statements. Insurance proceeds of R52,2 million (net of Value Added Tax) have been received to date and accounted for as sundry income.
			For clarity, the total impact of both recalls has been accounted for on the income statement as follows:
			Revenue impact	1,7	254,9
			Cost of sales impact	4,9	308,3
			Associated costs included in sales and distribution expenses	6,8	68,7
			Associated costs included in marketing expenses	3,0	10,0
			Associated costs included in other operating expenses	–	4,9
			Total cost of product recalls	16,4	646,8
		3.2	Impact of civil unrest
			The July 2021 civil unrest in KwaZulu-Natal (KZN) particularly impacted the Rice and Snacks & Treats businesses. This resulted in inventory write-offs across the two businesses, as well as physical damage to and loss of property, plant and equipment. The unrest also resulted in lost sales across the business up to 31 August 2021. During the current year, the group has received insurance claims relating to the civil unrest from the South African Special Risks Insurance Association (SASRIA). In total, R165,8 million (net of Value Added Tax) has been received to date, of which R28,3 million relates to insurance proceeds on the property plant and equipment written off following the civil unrest. The remaining insurance proceeds of R137,5 million which relate to inventory write-offs, repairs to damaged property, plant and equipment, cleaning and security costs, have been accounted for as sundry income.
			Cost of sales impact	–	85,2
			Associated costs included in non-operational items (refer note 7)	–	15,8
				–	101,0
		3.3	Sundry income
			Insurance proceeds from product recall	52,2	–
			Insurance proceeds from civil unrest	137,5	–
0,4			Other*	29,1	–
0,4				218,8	–

*	Other includes proceeds from scrapping, damaged goods, rentals and insurance proceeds.