Sector faces stock shortages
SA’s automotive sector will struggle to reach the heights of previous years because of specific stock shortages and other challenges caused by strikes, the CEO of CMH said yesterday.
THE South African automotive sector and its side industries will struggle to reach the heights of previous years because of specific stock shortages and other challenges caused by strikes and weak consumer demand, Combined Motor Holdings (CMH) CEO Jebb McIntosh said yesterday.
“The market is under pressure. Consumers are not confident. I think the strike season is largely over but it has left the automotive industry short of certain models of vehicles,” Mr McIntosh said following the release of the company’s results for the six months to August.
“There is also a loss of production and it will take a while for backlogs to be caught up and consumers to spend again,” he said.
CMH owns motor dealerships, vehicle rental service centres and other automotive businesses.
In the reporting period, on a comparative basis, the group achieved a 17% increase in revenue to R5.03bn from R4.31bn, which translated into a 10% improvement in gross profit.
Selling and administration expenses were contained at a 4% increase and the operating margin, excluding a prior-year impairment to goodwill, increased from 2.2% to 2.8%. The overall result was a 91% improvement in total profit and comprehensive income.
After eliminating the interests of noncontrolling shareholders, the group achieved an 89% and 42% increase in basic and headline earnings respectively.
The group proposed a dividend of 28c per share, payable in December this year.
“We are happy with this set of financial statements and we expect a reasonable second six months. I am quite positive about CMH’s perfor- mance and the automotive industry overall,” Mr McIntosh said.
Within the group's retail motor division, new vehicle sales volumes increased 9% compared with an industry increase of 5%.
Used motor vehicle volume sales increased 8%.
CMH made efforts to increase the penetration level of after-sale products and also to tighten up expense controls. This led to an increase in the operating profit margin from 2.2% to 2.3%, Mr McIntosh said.
The car hire segment’s operating profit margin improved from 7.3% to 9.3%, largely because of higher fleet use rates and an increase in average daily rental returns.
“In the face of tough competition, First Car Rental was awarded two large tender contracts and four new branches were opened to provide customer service in outlying areas,” Mr McIntosh said.