Johannesburg - Imperial, owner of South Africa’s biggest car-dealership network, said full-year profit will probably be unchanged in 2016 as tough trading conditions fuelled by the weaker rand and rising interest rates are unlikely to improve in the near term.
Headline earnings per share, which exclude one-time items, rose 6 percent to R8.01 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 R59.8 billion ($3.9 billion).
Imperial 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.
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, deteriorating business confidence and slowing private-sector investment, 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.”
Government talks
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.
Imperial shares have gained 6 percent this year in Johannesburg, compared with a 3 percent decline by FTSE/JSE Africa All-Share Index.
BLOOMBERG