Imperial Holdings Ltd. (IPL), owner of South Africa’s biggest car dealership network, said its automotive business became less profitable as falling disposable incomes wiped out growth of new vehicle sales.
The operating margin of the car division, which accounted for 60 percent of sales, narrowed to 5.4 percent in the six months through December from 6.3 percent as the South African economy slowed. The Johannesburg-based company, which imports Hyundai Motor Co. (005380) and Kia Motors Corp. (000270) vehicles to Africa’s biggest economy, sold 61,010 new units during the half year, about the same as the same period a year ago. Used car sales increased 4 percent.
“We anticipate trading conditions in the new motor vehicle market to be tougher,” the company said. “Reduced disposable income, interest rate increases, a significantly weaker currency and the high base created by strong volume growth over the past four years all present headwinds affecting margins and growth.”
Africa’s biggest economy is forecast to grow 2.8 percent in 2014, according to the South African Reserve Bank, revised down from 3 percent. The rand is the second-worst performer this year of 16 major currencies tracked by Bloomberg. The benchmark interest rate was raised to 5.5 percent on Jan. 29.
Imperial shares fell as much as 4.7 percent, the biggest intraday decline in more than three weeks, and traded 3 percent lower at 162.94 rand as of 10:43 a.m. in Johannesburg, extending this year’s decline to 19 percent.
Net income for the six months through December gained to 1.73 billion rand ($161.7 million), compared with 1.58 billion rand a year ago, the company said in a statement today. Sales rose 13 percent to 51.36 billion rand. The company raised its half-year dividend by 5 percent to 4 rand a share.
Imperial said the operating margin at its logistics division widened to 5.3 percent from 4.5 percent in the same period in 2012. The company is expanding in Africa markets including Nigeria, where it bought a 49 percent stake in local company MDS Logistics.
Imperial has appointed Massmart Holdings Ltd.’s founder Mark Lamberti as new chief executive officer. He will take office on March 1, succeeding Hubert Brody.
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