Logistics group Imperial warned shareholders its headline earnings for its financial year to end-June would suffer from "a significant increase in foreign exchange losses and higher financing costs".
Imperial said in a statement released before its annual investor day briefing by CEO Mark Lamberti on Tuesday that problems during the current financial year included low water levels on the Rhine river that harmed its German subsidiary Lehnkering, which was acquired in 2011 for €270m.
In its home market, which contributed 59% of its interim R35.2bn revenue and 64% of its R1.9bn operating profit, the group said its vehicle importing subsidiary Motus suffered from the rand’s plunge following President Jacob Zuma’s Cabinet reshuffle.
The see-sawing rand also caused it to suffer foreign exchange hedging losses.
"Following the president’s politically motivated ill-advised and illogic decision to replace highly respected ministers in treasury, S&P downgraded SA’s long-term foreign currency sovereign credit to subinvestment grade on April 3. Fitch followed on April 7 downgrading both foreign and local currency debt to sub-investment grade," Imperial said in its trading update.
"These developments have cast doubt on the expected recovery of GDP in 2017, with a high probability that a similar move to subinvestment grade by Moody’s could result in recessionary conditions heading towards 2018. If so, already-fragile business and consumer confidence will deteriorate in response to a weaker rand and rising interest rates, inflation, unemployment and social unrest."
In the eurozone, UK and Australia, Imperial said slow economic recovery continued and trading conditions remained satisfactory.
But besides transport problems along the Rhine, its logistics businesses were harmed by lower demand and pricing pressures in the steel, energy, commodities and construction sectors.
In 2014, Imperial started to restructure itself into two separate entities: Imperial Logistics and Motus.
Over the past three years, 42 businesses with total revenue of R11.8bn and operating profit of R886m, and 82 properties had been or were in the process of being sold in a number of unrelated transactions in various jurisdictions. The total capital employed in these businesses and properties totalled R4.4bn, Imperial said.