Naspers Sub-Saharan Africa Business Hit by Commodities Drop

  • Depressed economies will pressure full-year earnings, CEO says
  • Prices frozen to keep TV services affordable to consumers

Naspers Ltd., Africa’s largest company by market value, said fiscal full-year profit growth will be held back by depressed sub-Saharan economies, where consumers are struggling to pay for extras like online movies and TV.

Best known for its early investment in Chinese e-commerce site Tencent Holdings Ltd., Cape Town-based Naspers has expanded in the rest of Africa, where the company generates about one-fifth of its sales with cable-TV offerings and ShowMax, a Netflix-like service.

With local economies slowed by a drop in commodities prices and weaker local currencies, Naspers has refrained from raising prices, absorbing the impact of higher costs so consumers will keep paying for its products, Chief Executive Officer Bob van Dijk said in an interview. That’s held down profit, he said.

“We are trying to help our customers in the region by not raising our prices, even though we buy our content from places like Hollywood and pay for it in dollars," Van Dijk said. Since June 2014, oil prices are down about 60 percent. “This is devastating for economies like Nigeria, a country that also saw its currency weaken significantly.”

Two years into the job, Van Dijk is expanding Naspers’ online streaming service across Africa, the least-connected continent with a significant population, to counter Netflix Inc.’s domination plans. But consumers in Africa and Russia, another targeted market, have lost ground as commodity prices slumped. Nigeria’s gross domestic product growth slowed to 2.8 percent in 2015, the weakest level since 1999.

Naspers, which owns Africa’s biggest pay TV business, spent $1.2 billion to gain control of Russian Craigslist copy Avito last year. Van Dijk plans to expand the online classifieds business in Africa and is considering Nigeria as the next country to introduce mobile online payments system PayU, he said.

Analysts project Naspers’ revenue will rise 13 percent to 82.3 billion rand ($5.4 billion) in the year ending March 31, the average of 14 estimates compiled by Bloomberg. Profit, excluding some items, is forecast to more than double to 16.8 billion rand.

The Tencent stake is worth more than $60 billion today, more than Naspers’ own market capitalization, indicating that investors affix no value to Naspers’ other businesses. Van Dijk is still investing, making bets where he sees opportunities even if the market disagrees.

“We try not to second guess the market,” said Van Dijk, a former head of eBay Inc.’s German operations. “In time the market will start to understand these other businesses and see the value. We want to stay in business in the region and see a lot of potential and opportunities in sub-Saharan Africa still.”

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