Imperial Logistics in drive to reduce fixed overhead costs |
This would involve rationalisation and consolidation in both its South African and European operations
IMPERIAL Logistics, the listed African and European logistics provider, plans to reduce fixed overhead costs in its South African business by 10 and by 20 percent in its European business in the second half of its financial year.
Mohammed Akoojee, the chief executive of Imperial Logistics, said yesterday that this would involve rationalisation and consolidation in both its South African and European operations and would involve some retrenchments.
But Akoojee declined to comment on the number of retrenchments envisaged and stressed that the reduction did not only involve reducing staff.
Akoojee said the big reduction in fixed costs involved items such as IT costs and going from three to one facility, which led to a reduction in costs for electricity, security and other services to run the buildings. The company would also exit out of unprofitable contracts and reduce fleet.
“That is what is needed in difficult times. But that is getting the business right for when the economy starts turning. Then we will start to see the benefits of this starting to come through,” he said.
Akoojee said the company was pursuing a number of growth opportunities, including an expansion into the automotive aftermarket logistics market and its European logistics business into new markets.
He said that the focus of their European logistics business had been largely on Germany, although it had already expanded into Eastern Europe.
Akoojee said its geographic expansion would be driven by its capability for its global clients rather than saying that they wanted to work in China or South Korea.
Akoojee added that they were already busy setting up a consolidation facility in China for a big automotive aftermarkets importer to South Africa, which was where they sourced most of their products. He said they would be helping this importer to manage that supply chain better.
Akoojee said this was “a massive opportunity” for Imperial Logistics, because even though vehicle production may decline or be steady, there was a massive car parc and those vehicles need parts.
Imperial Logistics yesterday reported a 24 percent growth in continuing headline earnings a share to 300 cents in the six months to December from 241c in the previous year.
Continuing revenue rose 6 percent to R26.6bn from R26.3bn.
Continuing operating profit at R1.3bn was in line with the prior period. An interim dividend a share of 135c was declared.
Shares in Imperial Logistics closed 9.99 percent lower on the JSE yesterday at R64.43.