South Africa's Tiger Brands took a $120 million hit on Thursday as it wrote-off the full value of its loss-making Nigeria unit, prompting a rethink of its sub-Saharan Africa expansion strategy.
South Africa's biggest consumer foods maker has not made a profit from Nigeria's Dangote Flour Mills (DFM) since paying nearly $200 million for a 65 percent stake in the pasta and flour maker three years ago.
Tiger Brands has written-off 1.7 billion rand ($120 million) from DFM, adding to the two impairments last year totaling 954 million rand, as the business struggled with tough competition and a weakening naira currency.
"We spent a bucket load of cash learning those lessons and shareholders are clearly upset," outgoing chief executive Peter Matlare Matlare said.
"We have to revise what the strategy should look like and that's work that is underway right now," added Matlare, who will step down at the end of the year after eight years at the helm.
Shares in Tiger Brands climbed 2.2 percent to 332.24 rand by 0956 GMT, outpacing a 1 percent gain on the blue-chip JSE Top-40 index, as investors welcomed clarity over DFM.
Tiger Brands, which named chief operating officer Noel Doyle as temporary CEO from next year, reported a surprise 2 percent fall in full-year profit due to the write-off.
Diluted headline earnings per share totaled 1,757 cents in the year to the end of September, missing analyst expectations of 1,798 cents, or growth of 2 percent.
Earlier this week, Tiger Brands said it would no longer provide funding to DFM as part of wider review of its investment in the company, a move that could test DFM's survival.
Shares in DFM slumped 4.85 percent to 1.96 naira, giving a market value of $50.5 million, or nearly a third of its $141 million net debt.
Dangote Industries, owned by Africa's richest man Aliko Dangote, holds a 10 percent equity stake in the company. Dangote and three other directors resigned on Monday.
In a bid to turn DFM around over the last three years, Tiger Brands mothballed some of its mills and introduced new, higher margin products.
But those efforts were dealt a blow late last year when Nigeria devalued the naira, resulting in higher input costs and as Africa's biggest economy struggled with lower oil prices.
Tiger Brands also wrote down 250 million rand from its investment in Nigeria's Deli Foods, in which it holds 49 percent stake, citing a weaker currency and slowing demand.