Steinhoff First-Half Profit Gains as European Margins RiseKamlesh Bhuckory
Steinhoff International Holdings Ltd., the South African furniture chain that generates more than half its sales from Europe, said fiscal first-half profit rose 44 percent as consumer spending and market share improved.
Net income for the six months through December increased to
4.6 billion rand ($425 million) from 3.2 billion rand a year earlier, the Johannesburg-based company said in a statement today. Sales advanced 17 percent to 67.4 billion rand.
“Definitely, there is good margin from sourcing, manufacturing and retail,” Mark Hodgson, an analyst at Avior Research Pty Ltd., said in a phone interview. Steinhoff reported “very decent earnings,” said the analyst, who has a outperform rating on the shares.
Steinhoff is benefiting from signs of economic recovery in Europe and a weaker South African rand against the euro, which the company gets through sales at brands including France’s Conforama chain. The rand’s decline against most other currencies prompted the company to sell 465 million euros ($640.7 million) of convertible bonds in January.
“Nearly two-thirds of Steinhoff’s revenues are generated in currencies other than the rand, which influences the group’s reported earnings,” Chief Executive Officer Markus Jooste said in a seperate e-mailed statement. “We expect that the volatility of the rand exchange rate will continue to influence the group’s reported earnings for the remainder of the 2014 financial year.”
Steinhoff said its integrated retail business and group purchasing continue to benefit from its enlarged European retail network. The household goods market in the region started to indicate a recovery in under way from October 2013, while Conforama continued to report market share gains across most territories.
“In a period where consumer confidence in Europe showed some improvement, market share gains and margin improvement were prominent in many of the countries where we operate,” the company said.
Steinhoff shares fell 0.6 percent to 51.04 rand at the close of trading in Johannesburg, valuing the company at 104 billion rand. The stock has advanced 13 percent this year, compared with a 2.9 percent increase in the 165-member FTSE/JSE Africa All Shares index.