Imperial of South Africa Slumps Amid Profit-Decline Forecast

(Bloomberg) -- Imperial Holdings Ltd. fell for a third consecutive day after the South African logistics and automotive company said operating profit will probably decline in the year through June, with conditions across the business expected to remain challenging.

The shares slumped 2.1 percent to 167.67 rand at 3:36 p.m in Johannesburg, paring gains for the year to 40 percent. A close at that level would be its lowest since Aug. 17.

The current outlook for the financial year indicates single-digit revenue growth and a “moderate” decline in operating profit from continuing operations, the Johannesburg-based company said in a statement on Tuesday. Profit on that basis gained 3 percent to 6.4 billion rand ($474 million) in the 12 months through June.

“There’s not a lot of reason to be excited,” about the outlook for operating conditions over the next year, Chief Executive Officer Mark Lamberti said in a presentation in Johannesburg. “The year ahead is going to be a challenging one.”

The CEO is pursuing international expansion of the company’s logistics operations, which range from pharmaceutical deliveries in Africa to barging on the Rhine. The company’s other main business is its vehicle division, which includes importing, dealerships and rental operations in sub-Saharan Africa. Economic growth in South Africa is expected to stall this year, according to the country’s central bank.

“We expect volume growth throughout our logistics operations to be subdued, and national new vehicle sales in South Africa to continue to decline in response to declining private consumption expenditure, rising interest rates and tightening credit,” the company said.

Efforts by Lamberti to simplify the company and sell assets in his two years at the helm had effectively split Imperial in two and in June the company officially reorganized into new units for the operations, each with its own CEO and management teams. It’s still too early to talk about whether Imperial could be broken up into separate logistics and vehicles companies, Lamberti said, although he repeated previous comments that the question is an obvious one.

While Lamberti said he believes unbundling often creates value for investors, he wouldn’t be drawn on whether Imperial is likely to pursue a split.

“We’re not having that discussion, even internally, until we can say we’ve got two really great focused businesses and they are really doing well,” he said. “I’d be disappointed if by this time next year we couldn’t answer that question.”

The company continues to pursue logistics acquisitions outside South Africa and has an active pipeline of potential targets in the rest of the continent, Lamberti said. While Imperial continues to receive and evaluate potential deals, the company’s next transaction will probably be in Africa, where the company will continue to focus on fast-moving consumer goods and pharmaceuticals distribution. Imperial could move toward an acquisition by the end of the calendar year, he said.