Imperial of South Africa Profit Rises Amid Tough Car-Sale Marketby
Car dealer see unchanged profit in 2016; vehicle sales to fall
Company in talks with government about how to boost economy
Imperial Holdings Ltd. said first-half profit rose even as the weaker rand and subdued vehicle sales stifled trading and the owner of South Africa’s biggest car-dealership network said conditions were unlikely to improve in the near term.
Net income gained 19 percent to 1.7 billion rand ($111 million) in the six months through December, the Johannesburg-based company said in a statement on Tuesday. Profit was boosted by two acquisitions the company made in 2014. Revenue gained 6 percent to 59.8 billion rand.
The company expects single-digit revenue growth and unchanged operating profit from continuing businesses in the year through June, Imperial said. Economic growth expectations in South Africa, which accounts for 59 percent of Imperial’s revenue, have been damped by a severe drought and deteriorating business and consumer confidence, in addition to a weakening global economic growth outlook.
“There is no reason to anticipate an improvement in the trading conditions facing Imperial during 2016," the company said. “We expect volume growth throughout our logistics operations to be subdued, and national new-vehicle sales in South Africa to decline between 5 percent and 10 percent in response to fragile consumer confidence and rising interest rates."
Imperial shares gained 5.7 percent to 133.78 rand as of 10:28 a.m. in Johannesburg, the highest since Dec. 10. The stock has gained 12 percent this year, compared with a 4 percent decline by FTSE/JSE Africa All-Share Index.
The company is seeking to reduce its exposure to the effects of the depreciation of the rand, which increases the cost of importing vehicles. The rand weakened 25 percent against the dollar last year, following a 9.3 percent decline in 2014. Imperial will also offset lower vehicle sales with price increases.
Imperial said it will continue to talk to South Africa’s government about boosting economic growth and avoiding a credit-ratings downgrade.
The heads of South Africa’s biggest companies met President Jacob Zuma and Finance Minister Pravin Gordhan in separate meetings in the past month to discuss ways to boost the ailing economy.
“While there is no panacea for South Africa’s economic recovery we are encouraged by government’s more recent engagements with business," Imperial said.