JD Group Extends Two-Day Drop to Most in 12 Years on Bad Debts

JD Group Ltd. (JDG), South Africa’s biggest listed furniture retailer and provider of unsecured loans, recorded its biggest two-day fall in 12 years after it raised bad debt provisions and said it will sell shares.

The stock declined as much as 10 percent, extending its slide to 16 percent over two sessions, the most on an intraday basis since March 2002. It traded 5.2 percent lower at 24.08 rand as of 4:09 p.m. in Johannesburg. About 971,000 shares traded, almost three times the three-month daily average.

South African retailers have been struggling over the past year as high unemployment and inflation hurt consumer spending, while those that take credit sales have been particularly vulnerable to the economic slowdown. Retail sales growth declined to 3.5 percent from a year earlier in December compared with 4.4 percent the previous month, Statistics South Africa said today.

African Bank Investments Ltd. (ABL), South Africa’s largest provider of unsecured loans, said on Jan. 30 it’s seeking a partner for its furniture retail unit, Ellerine Holdings. That’s part of a three-year turnaround plan that also involves using capital from last year’s 5.5 billion-rand ($500 million) rights issue.

“With the unfavorable credit conditions, the prospects are not looking good,” Andrew Bryson, a derivatives trader at Nedbank Private Wealth in Johannesburg, said by phone today. JD Group is “struggling - it’s what is underlying the fact that they need to raise capital.”

JD Group said yesterday it will sell shares worth as much as 1.5 billion rand and will report a loss for the fiscal first half. Its provision for bad loans was increased by 602 million rand to to 1.56 billion rand to account for a deteriorating credit environment, it said.

The rights issue is fully underwritten by Steinhoff International Holdings Ltd., which owns a 56 percent majority stake in JD Group, according to data compiled by Bloomberg.

South Africa’s Reserve Bank raised borrowing costs last month for the first time since 2008 when it increased the benchmark interest rate to 5.5 percent.

To contact the reporter on this story: Janice Kew in Johannesburg at jkew4@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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