Imperial makes move into South America

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Johannesburg - Imperial Holdings has taken a bold step in a strategy to grow its international footprint by expanding its international logistics business into South America.

It is also looking at possible expansion into other international markets.

Hubert Brody, the chief executive of the listed transport and mobility group, said yesterday its international logistics business had been able to secure a significant contract for the transport of iron ore 2 400km down an important waterway on the Paraná River, from central Brazil through Paraguay to a steel mill in Argentina.

Brody declined to identify the client or the estimated annual value of the contract but indicated that the client was a prominent global steel manufacturer based in other areas but with its roots in Argentina.

He said the contract had already been commissioned and this project would start making a meaningful difference to the financial figures of the international logistics business from the second half of this financial year onwards.

Brody said Imperial had a strong logistics base in Germany but was now reaching out into other areas and had been looking for a long-term breakthrough contract in South America to give it the sustainability to put in the infrastructure.

He had no doubt that from a shipping viewpoint, Imperial would be able to replicate in South America what it had achieved in Germany.

“It could take 10 years and we can become a major player because we can apply there most of what we have learnt over the years in Europe.”

Brody said Imperial’s South American initiative would be its main international expansion drive in the immediate future. But it would continue doing small-scale research and development in Russia and smaller logistics activities in pharmaceutical distribution and for key client fashion retailer H&M in China.

Brody said Imperial’s logistics business had more than doubled its revenue over the last four years to R20 billion and now accounted for a third of group operating profit.

It would account for a larger part of the group’s profit in the near future and it was the main target of the group’s capital allocation, he said.

Imperial yesterday also reported the acquisition of 53 percent of Nigerian pharmaceutical product distributor Ecohealth for $74 million (R797m).

The remaining shareholding in the business is owned by the management, previous owners and a Dutch private equity fund.

Brody said Ecohealth, the representative in Nigeria for a number of products for several global pharmaceutical manufacturers, had a turnover of $180m a year. The Nigeria pharmaceutical market was worth about $950m a year but was forecast to grow at about 15 percent a year for the next five years.

Imperial yesterday reported a strong financial performance in the six months to December.

Revenue rose 13 percent to R51.36bn from R45.26bn.

Operating profit grew by 8 percent to R3.16bn from R2.9bn. Of this, the logistics business contributed R1.1bn, the automotive and industrial business R1.67bn and the financial services business R543m.

Headline earnings a share was flat at 831c.

Brody attributed this largely to R70m once-off impact of the charge for amending the conversion profile of the deferred ordinary shares issued to empowerment partner Ukhamba.

Diluted core earnings a share improved by 10 percent to 915 cents from 835c.

An interim dividend of 400c was declared, 5 percent higher than the 380c in the previous corresponding period.

Brody said the group was well positioned to grow organically and through acquisitions.

Imperial shares dropped 4.25 percent yesterday to close at R160.75. - Business Report


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