Weak economy slows down Combined Motor Holdings
Retailer says sales of new passenger and light commercial vehicles fell 3.5% in the six months to end-August
Combined Motor Holdings (CMH) says sales of its new-passenger and light-commercial vehicles have declined as cash-strapped customers seek lower-priced models.
The decrease in CMH’s vehicle sales reflects an industry-wide trend. Earlier in October, the National Association of Automobile Manufacturers of SA (Naamsa), the body representing the country’s vehicle manufacturers, reported a 0.9% drop in year-on-year new-vehicle sales.
At the time, Naamsa said consumers and businesses were likely to delay purchasing decisions on big items such as new vehicles until the economy recovered. Naamsa represents 41 car, light commercial vehicle, truck and bus manufacturers as well as all importers and distributors of vehicles in SA.
CMH, a dealer in several automotive brands including Honda, Isuzu, Land Rover and Nissan, said in the six months to the end of August sales of new-passenger and light-commercial vehicles fell 3.5%.
“Only the proliferation of sales incentive schemes and subsidised finance rates has kept this level from further decline. The used-car market fared no better, with an estimated 4% to 5% drop in sales over the period,” the company said.
In the six months, CMH increased revenue 2.6% to R5.7bn. Headline earnings per share rose 2% to 120.9c. The company declared a dividend of 61c.
“Given the prevailing economic climate, with low growth in gross domestic product and a disappointing consumer confidence level, the directors are satisfied with the marginal growth in headline earnings,” it said.
The company said its decline in new-vehicle sales during the period was only 2%, compared to a national decline of 3.5%. CMH said trading margins came under pressure as dealers competed for market share.
“The results compare favourably with the group’s peers and many of the large companies within the retail sector,” the company said.
But it said pressure on discretionary income and low business levels were expected to continue throughout the financial year.
“The 25-basis-point decrease in the prime lending rate, and the potential of more to follow, will be offset by a substantial increase in the cost of fuel. The unemployment rate remains high, and general strike action more prevalent, although this appears to have been averted in the motor sector,” CMH said.
Business confidence remained low and was exacerbated by the government’s indecision and lack of remedial implementation in key economic areas, it said.
Improvement in CMH’s performance depends on the bedding down of new acquisitions, the disposal of loss-making operations, and an increase in new-vehicle sales volumes.