Picture: Alessandro Garofalo

Johannesburg - Naspers’s debt was cut to junk by Fitch Ratings, which said the cost of expanding Africa’s largest media company is hurting earnings.

The long-term and short-term issuer default ratings were each lowered one level to BB+ from BBB-, and to B from F3, respectively, Fitch said in a statement.

Naspers reported the slowest annual profit growth in at least six years in June as the company expanded Chinese Internet and African television businesses.

Adjusted net income rose 1 percent to 8.6 billion rand in the 12 months through March, in contrast to a 26 percent jump in sales.

Cape Town-based Naspers said at the time that it plans to invest in new ventures and to spend “heavily” on adding to existing operations.

Fitch’s move “wasn’t too much of a surprise,” as “Naspers’s earnings outlook is weak because of its investments,” said Kate Turner-Smith, an analyst at BPI Capital Africa in Cape Town.

Naspers fell as much as 2.4 percent to 1,382 rand and was trading down 0.8 percent at 10:05 am in Johannesburg, snapping three days of gains.

Fitch also lowered Naspers’s senior unsecured debt to BB+ from BBB-.

The outlook is stable, meaning the ratings are unlikely to be changed again soon.

“The downgrade reflects the deterioration in the group’s profitability mainly due to its high development spend as Naspers continues to invest in growth opportunities,” the credit-reporting company said.

The move takes into account “higher-than-expected investments in global e-commerce and sub-Saharan pay-TV opportunities.”

Moody’s Investors Service rates Naspers debt at Baa3, the lowest investment grade, with a stable outlook. - Bloomberg News