Imperial Holdings is expanding its motor vehicle business into Africa as part of a strategy to reduce the impact of volatility of the rand and cyclicality of the South African new vehicle market on the financial performance of the listed transport and mobility group.
Manny de Canha, the chief executive of the Associated Motor Holdings (AMH) subsidiary, confirmed it had plans to replicate its vehicle business in Africa and had already started this process by securing the vehicle distribution and dealerships business from Nissan for four countries – Kenya, Tanzania, Malawi and Zambia.
“We are doing it with Nissan because it’s an established brand and then we want to obviously look at other brands but it’s going to take some time,” he told Business Report during an exclusive interview last week.
AMH is responsible for the distribution, retail and allied services businesses within the Imperial Group. It distributes a number of vehicle brands into the South African market, including Hyundai, Kia and Renault.
De Canha stressed it wanted to focus on right-hand drive vehicle markets in sub-Saharan Africa to enable it to benefit from the duty-free area of the Southern African Development Community.
He said it would probably take four to five years to grow the business in Africa but it would still remain small compared with its South African vehicle business and probably contribute only 15 percent to 20 percent to AMH’s revenue and operating profit.
“It will be very small because Africa is small in terms of vehicle sales. If you take the whole of Africa outside the north of Africa, it probably [accounts] for half of South Africa’s sales,” he said.
But De Canha confirmed it provided the Imperial Group with a foot in the door to the African vehicle market and if the growth forecast for the continent became a reality “then we are there”.
Mark Lamberti, the group chief executive of Imperial Holdings, said last week that the company wanted to decouple the impact of rand volatility on its vehicle import, distribution and dealerships division from having a financial impact on the whole group.
He said the impact of the rand on the sales of new cars disproportionately affected the financial performance of the group and it could not allow this to continue “to the extent that it does at the moment”.
“It is something we are obliged as management to do our utmost to avoid. We are thinking through how to do that,” Lamberti said.
“If that means building non-new car sales-related motor businesses or building our strength in logistics or having a bigger foreign presence, which is in itself a hedge, all of those things need to be done.
“[But] we are not going to isolate and uncouple the business. The business is an integral part of the Imperial offering and it will always be that way,” he emphasised.
The weakness of the rand drove the operating profit of the vehicle import, distribution and dealerships division down by 32 percent, or R710 million, to R1.5 billion in the year to June from R2.2bn in the previous year despite its revenue growing by 5.5 percent to R27.1bn in the period.
The division’s operating margin deteriorated to 5.6 percent from 8.7 percent.
The other divisions of the group – Logistics Africa, Logistics International, Vehicle Retail, Rental And Aftermarket Parts, and Financial Services – all performed well and showed good growth.
Imperial’s share price gained 1.08 percent to close at R191.08 on the JSE yesterday.