Imperial pulls back its forecast
Imperial Logistics no longer expects double-digit profit growth in its year to end-June, saying on Tuesday its international division has been hardest hit by the Covid-19 outbreak.
Imperial Logistics no longer expects double-digit profit growth in its year to end-June, saying on Tuesday its international division has been hardest hit by the Covid-19 outbreak.
Imperial operates in more than 32 countries. Its international operations include UK, Germany, China, Sweden and Italy.
The group ’ s international division, which contributed about a third of operating profits in its half-year ended December 2019, has been hit by shutdowns.
The automotive contract logistics and related transport businesses are most affected, though volumes in its shipping and chemicals businesses were resilient.
Other operations within the international division are still up and running, though volumes are being negatively affected in some In instances, SA, a part the of group the groups said.’ business continues to operate, providing essential services in terms of transport of consumer goods and medication.
The group’s African division is mainly engaged in health care and consumer goods distribution, and while there were some supply concerns, most businesses continue to operate with sufficient stock on hand, Imperial said.
Imperial had said in February it expected low double-digit growth in operating profit for the year to end-June 2020, but had now withdrawn this guidance.
“At this stage, Imperial has adequate headroom in terms of debt covenants and liquidity,” the company said. “Stringent, proactive measures have been implemented across the business to manage costs and optimise working capital and capital expenditure, with a stronger focus on cash-flow generation during these uncertain times,” the statement read.
In morning trade on Tuesday, Imperial’s share price was up 2.78% to R25.90, having more than halved so far in 2020.
Casparus Treurnicht, portfolio manager at Gryphon Asset Management, said the whole market was “extremely nervous” about the effect of the coronavirus on earnings.
“At the moment we don’t know what we’re in for. Nobody knows how they should be factoring in the coronavirus into their projections,” he said.
While logistics companies may have managed to get some easy wins as a result of retailers ramping up on stocks and inventories resulting from panic buying, there is going to be reversal of that, Treurnicht said.
“We had retailers ramp up on logistics because people went on a buying spree just to make sure the kitchen cabinet is full, but then we’re going to go into a period where people are going to buy less,” he said.
Treurnicht said “from a retail perspective, you will see logistics probably hold, but for the rest of the economy, especially manufacturing and that part of distribution, we’re in for a big hit, but we don’t know what exactly we’re looking at. We don’t know if there’s going to be an additional lockdown later on”.