The R106 million (Sh768.5 million) accounting manipulation at Haco Tiger Brands plunged the company into a loss that has been shared by its owners — South Africa-based Tiger Brands and Kenyan business tycoon Chris Kirubi.
The Sandton-based multinational says the accounting fraud, in the form of pulling forward sales and falsification of stocks, cost it R50 million (Sh312 million) at a group level as the subsidiary sunk into an undisclosed loss in the year ended September 2015.
“The Haco issue, disclosed at the interim, which consisted of pre-invoicing of R106 million (Sh768.5 million) in the previous year, as well as other accounting misstatements, had a negative impact on the current year’s operating profit of R50 million (Sh312 million),” Tiger Brands says in its latest annual report.
Tiger Brands says that it “accounted for minority shareholders’ share of after-tax losses in Haco,” indicating that Mr Kirubi, being the minority owner, took part of the hit.
Tiger Brands recorded an after-tax profit of R942 million (Sh5.8 billion) in the year, down from R1.8 billion (Sh11.6 billion) the previous year, partly attributing the earnings decline to the Haco scandal.
The multinational has operations in several African countries including Nigeria and Ethiopia.
Tiger Brands acquired a 51 per cent stake in Haco from Mr Kirubi in 2008 for an estimated R45.5 million (Sh284 million at current exchange rates), leaving the businessman with a 49 per cent interest in the company.
Management of the Nairobi-based fast moving consumer goods manufacturer was accused of overstocking major distributors to make it appear like they had hit their performance targets.
“This significantly affected 2015 results due to overstock positions carried forward by major distributors and the required one-off corrections,” Tiger Brands said in the report.
Haco deals in BIC brand of pens, personal and household care products such as Ace, BIC, Jeyes, Miadi, Motions, TCB, Bloo, and SoSoft. Also known as “channel stuffing”, the fraud has been unearthed at major retailers and fast moving consumer goods manufacturers including Coca-Cola and Tesco whose three former directors were on Friday charged with a £263 million (Sh35.5 billion) accounting scandal.