SOUTH AFRICA – Walmart-owned Massmart on Thursday painted a bleak picture of the South African economy and said it expected trading conditions to remain constrained going into the second half if its financial year.

The owner of Makro, Game, Builders Warehouse and Cambridge Foods reported diluted headline earnings per share (HEPS) of 122.4c for the 26 weeks ended June 28 2015 down 26.4% compared with the year-earlier period.

Massmart is a managed portfolio of four divisions, each focused on high-volume, low-margin, low-cost distribution of mainly branded consumer goods for cash, in 13 countries in sub-Saharan Africa.

The group is the second-largest distributor of consumer goods in Africa, the leading retailer of general merchandise, liquor and home improvement equipment and supplies, and the leading wholesaler of basic foods.

The retailer said total sales grew by 9.1% to R38.9bn compared with those in June 2014, while group operating profit — excluding foreign exchange movements and interest — increased by 12.7%. It said the growth in profit was lower than it had hoped “but is satisfactory given the soft economic environment”.

Massmart said many countries in sub-Saharan Africa faced economic challenges due to the stronger dollar and weaker commodity prices.

“While we remain confident and resolute about delivering our strategic priorities, we are concerned that for the next 12-18 months the South African and most sub-Saharan consumer economies are unlikely to be supportive.

In addition, Massmart’s South African performance may be hampered by our relative exposure to general merchandise in a tightening interest rate cycle,” the retailer said.

Massmart declared an interim gross cash dividend of 146c per share, unchanged from the year-earlier period. In the past six months, the share has dropped about 30% in value.

On the JSE, Massmart closed at R115.76 on Wednesday, valuing the company at about R25.4bn. 

August 28, 2015;