Power woes and commodity slump hurt Super Group
There has been a dramatic decline in commodity volumes, in particular coal and copper, says CEO
Super Group’s share price fell 7.45% after the transport logistics company reported a drop in interim earnings and revenue for the first time in 11 years.
On Monday the shares closed at R20.63, their single largest fall since February 11, which is the day after the group first warned of the expected drop in performance.
The company attributed the decrease in earnings and revenue for the six months to the end of December 2019 to electricity problems, declining volumes of commodities and SA’s poor economic prospects.
Super Group’s commodity-focused businesses have in the past boosted the firm’s performance despite difficulties in markets such as the UK and SA.
The electricity problems in SA and the decline in the movement of commodities in Sub-Saharan Africa affected Super Group’s Supply Chain Africa business.
“The conditions have become a lot tougher. There has been a dramatic decline in commodity volumes, in particular coal and copper. There has also been a decline in commodity trading in Sub-Saharan Africa,” group CEO Peter Mountford said.
In the six months, Super Group’s revenue fell 3% to R18.86bn from R19.44bn, mainly due to the decline in Dealerships UK’s revenue. Operating profit decreased 8.7% to R1.18bn. Super Group’s headline earnings were down 12.3% to R552m. Earnings per share and headline earnings per share slumped 19.4% and 12.3%, respectively.
Mountford said SA’s electricity supply crisis contributed to the decline in commodity volumes. “Because of load-shedding, there is a dramatic decline in volumes of (coal),” he said.
Mountford said a decline in the copper price in the Democratic Republic of the Congo (DRC) and Zambia resulted in reduced export volumes from those countries.
Super Group, which hit a low in 2009 when its market capitalisation fell to R349m, said the Supply Chain Europe operations continued to perform poorly in Germany as a result of a depressed automotive market.
It said new vehicle production volumes in Germany were down 8.4%. The German automotive manufacturing volumes were at a 23-year low, the company said.
It said Dealerships SA’s business, which houses dealerships in Gauteng, the North West, Mpumalanga and the Western Cape, reported a 3% decline in new vehicle sales while used vehicle sales increased 1%.
Super Group said Dealerships SA’s performance was in line with trends identified by the National Association of Automobile Manufacturers of SA.