Steinhoff First-Half Profit Increases on Rising Market Share

Steinhoff International Holdings Ltd., the South African furniture chain which last year agreed to buy Pepkor Holdings Pty Ltd. for $5.3 billion, said first-half profit rose 7.3 percent as market share increased.

Net income for the six months through December rose to 4.95 billion rand ($420 million) from 4.61 billion rand a year earlier, the Johannesburg-based company said in a statement on Tuesday. Sales advanced 12 percent to 64.6 billion rand.

Steinhoff is expanding into clothing with the acquisition of Pepkor, South Africa’s largest retailer, and is seeking to become one of the world’s biggest discounters with operations in Europe, Australia and Africa. The company plans to list on the Frankfurt Stock Exchange this year to increase its exposure to investors on the continent, where it generates more than half its sales and owns the French retailer Conforama.

The shares fell as much as 5.3 percent, the most on an intraday basis in six months, and traded 3 percent lower at

65.98 rand as of 4:06 p.m. in Johannesburg. That pared the gain for the year to 11 percent, outperforming a 6.6 percent increase on the FTSE/JSE Africa All Share index.

“Despite the clear momentum in the business, execution risks and second half foreign exchange headwind lead us to remain cautious,” London-based Exane BNP Paribas analysts including Jonathan Beake said in a note to clients. “Following a strong run into these results, the shares now trade close to our target price” of 67 rand.

Pricing, marketing campaigns and store investment “resulted in further market share gains,” Steinhoff said. Pepkor will “increase the group’s growth trajectory by enabling the group to expand its footprint and product offering in the growing value discount market.”

Steinhoff also owns a majority stake in JD Group Ltd., a South African furniture chain, and shares in KAP Industrial Holdings Ltd., a manufacturer.

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