Imperial Cargo trailer. Picture: SUPPLIED
Imperial Cargo trailer. Picture: SUPPLIED

Transport group Imperial Logistics says it expects earnings to have dropped by as much as 91% in the year to end-June, largely due to losses incurred by its consumer packaged goods business and the effect of Covid-19 across its operations in the second half of the period.

Imperial, which provides transportation for automotive, chemical and industrial sectors, said in a trading statement on Thursday that headline earnings per share (HEPS) would fall to between 95c and 115c or between 83% to 86% in the 12 months to June 30.

Gryphon Asset Management portfolio manager Casparus Treurnicht said: “This was a bigger-than-expected earnings shock and I can only think that activity stalling in retail, mining and industrial played a big role.”

EPS is expected to have  fallen to between 151c and 171c from 1,773c previously. The decline was also affected by one-off costs associated with restructuring in SA.

“Imperial is so closely tied to the economic performance of the regions that they operate in that they were hardly going to escape the consequences of the pandemic,” Treurnicht said.

“Do not forget that the import and export of goods came to a standstill. We are still seeing issues at ports and getting clearance for goods,” he added.

HEPS from continuing operations is expected to be down between 63% and 65%  to between 147c to 165c.

“Despite lower earnings for the year to and the effects of Covid-19 on our operations, Imperial continued to generate strong free cash flow and its balance sheet remains strong,” Imperial said.

Adding that this has also been supported by the proceeds of R3.4bn from the sale of the European shipping business. The group sold the shipping business in July as it plans to focus on growing its business in Africa.

“As such, Imperial has sufficient headroom in terms of capacity and liquidity, and is well within its banking covenant limits,” Imperial said.

The company's results for the period are due on August 25.

“Impairments will be a feature in the next set of results. The international business will also need to translate at a weaker currency. We will need to see where they still managed to make a profit. If you are making losses at a weaker exchange rate it can hurt really bad,” Treurnicht said.

At 4.20pm, Imperial Logistics’ share price was down 1.73% to R33.51, while it had fallen 42% so far in 2020.

mjoo@businesslive.co.za

Update: August 20 2020

This story has been updated to include an analyst's comments and more information on HEPS.

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