https://www.engineeringnews.co.za
Africa|Automotive|Business|Cutting|Energy|Environment|Financial|Imperial-Logistics|Logistics|Service|Sustainable|transport|Equipment|Products|Operations
Africa|Automotive|Business|Cutting|Energy|Environment|Financial|Imperial-Logistics|Logistics|Service|Sustainable|transport|Equipment|Products|Operations
africa|automotive|business|cutting|energy|environment|financial|imperial-logistics-company|logistics|service|sustainable|transport|equipment|products|operations

Imperial says nine-month performance ‘unsatisfactory’ amid Covid-19 impact

2nd June 2020

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer

     

Font size: - +

Africa- and Europe-focused logistics company Imperial Logistics says its performance in the nine months to March 31, was “unsatisfactory”, adding that the Covid-19 pandemic was continuing to severely impact on the company's operations in more than 32 countries.

During a yearly investor day briefing on June 2, the company noted that while its revenue for the nine months had expanded, its operating profit from continuing operations, excluding its European shipping business, had decreased year-on-year.

Additionally, the benefits of new contract gains, significant cost cutting, portfolio rationalisation and other restructuring initiatives undertaken during the 2019 financial year had been more than offset by the increasingly challenging macroeconomic conditions, which have been exacerbated by Covid-19-related lockdowns and restrictions.

In effect, this resulted in lower volumes and margin pressures across the Imperial business.

However, despite the uncertainty and challenging trading conditions, Imperial is still securing new business and retaining about 80% of its contracts across the business. New business revenue of R4.9-billion was gained during the nine-month period, with a strong pipeline of new business opportunities.

Further, the company said that, as lockdown restrictions in its key markets were easing, activity levels and volumes were increasing.

REGIONAL UPDATE
In South Africa, about 70% of the business is currently in operation, having improved from 55% in late March and April as activity levels have picked up with the easing of lockdown restrictions.

While key sectors like tobacco remain closed, and fuel volumes remain depressed owing to a lack of demand, Imperial’s performance is anticipated to remain at current levels until lockdown restrictions in South Africa are lifted further.

For the nine-month period to the end of March, Imperial’s South African business recorded double-digit revenue growth but lower operating profit as Covid-19-related restrictions started impacting on the business, as well as owing to related one-off costs.

“We are in the process of exiting, restructuring and consolidating business units in this division to reduce costs and complexity and to rightsize the business for a tougher economic environment exacerbated by Covid-19,” the company said.

The African Regions division is mainly engaged in healthcare and consumer goods sales and distribution, with nearly all its revenue generated from these two industries.

Most of Imperial’s countries of operation are in lockdown or partial lockdown, and while the company is still able to service various channels in most markets in its consumer business, demand has reduced owing to lower activity, mainly in markets where liquor and tobacco sales were negatively impacted owing to trading restrictions.

As a result of reduced volumes, margins are under pressure. Imperial’s healthcare business, as well as a strong order book from Imres (medical supplies and kitting business) is positive, although the supply and the delivery of products from India remains a concern.

Imperial has in excess of 120 days paid-up stock in Nigeria, which positions the company well to deal with the currency risks in the country. This division is benefitting from new acquisitions and new contract gains. As such, African Regions increased revenue but reduced operating profit for the nine months.

Meanwhile, in the International division, all businesses experienced a significant reduction in volumes and activities since March owing to Covid-19 restrictions.

The automotive contract logistics and related transport businesses were most impacted as all original-equipment manufacturers (OEMs) implemented plant shutdowns in March and April. About 36% of revenue in this division is generated from the automotive industry.

Volumes in Imperial’s chemicals and related shipping businesses were less impacted, and about 31% of revenue in this division was generated from the chemical industry.

Other businesses within this division also remained operational but recorded declining volumes. As many countries in Europe are now easing lockdown restrictions and OEMs in Germany are slowly returning to production, Imperial has seen an increase in revenue from the peak of the lockdown in March. Revenue is currently up to about 70% of normalised levels.

The International division has been most severely impacted by the pandemic and its recovery is dependent on the duration of the crisis and time taken to restore the broken supply chains – in addition to an already low-growth macroenvironment and industries under pressure.

FINANCIAL POSITION
Imperial further noted that it “remains focused on safeguarding and preserving [the company’s] balance sheet, especially in these uncertain times”.

As such, managing debt levels by curbing capital expenditure (capex), optimising working capital and generating operating cashflows to ensure that the company remains within its bank covenants levels; maintaining liquidity; and preserving cashflows are key priorities.

Proactive measures have been implemented to reduce fixed overhead costs, Imperial said, warning that its South Africa and International businesses were likely to further reduce overhead costs through further portfolio rationalisation and consolidation, and restructuring in the coming months.

A moratorium on all capex spend is in place, with only essential capex permitted.

Post the conclusion of the European shipping disposal, which is subject to regulatory and shareholder approvals, proceeds will be used to optimise the financial position of Imperial - reducing the company’s existing debt upon closing and providing capacity to pursue its strategic objective of investing in new areas that enhance its African growth vision in the future.

On receipt of these proceeds, which are anticipated by June 30, Imperial is expected to have sufficient headroom which provides it with balance sheet resilience to deal with a tough macro environment, exacerbated by the global pandemic. The company’s cash and liquidity position remains strong with about R10-billion of available facilities and cash, of which R8-billion is committed banking facilities.

Imperial also intends to progress the sale of the South American shipping business separately, which it hopes to conclude within 12 months.

Further, the company mentioned that while it continues to explore growth opportunities in other emerging and selected developed markets based on the relevance of capabilities, scale, benefits and client relationships that support trade flows into and out of Africa, it will “be cautious in investing in new acquisitions in the current calendar year”.

Additionally, Imperial advised that the company’s anticipated basic earnings per share (EPS) for the group for the financial year to June 30 are expected to decrease by more than 20% when compared to the 2019 financial year.

Basic headline EPS for the group in total and for its continuing operations for the financial year are expected to decrease by more than 20%.

Imperial management also anticipates at this stage that revenue for continuing operations (excluding the European shipping business) for the financial year 2020 will be maintained, and operating profit will decline by more than 20% compared to financial year 2019, owing to the negative impact of Covid-19 on the company’s trading and associated once-off costs to reduce fixed overheads, further portfolio rationalisation and consolidation, and restructuring in the upcoming months.

The benefits of these will be realised from the 2021 financial year.

“While we will continue to meet the demands and manage the implications of the pandemic in the short term, we will ensure that significant time and energy is given to delivering against our strategy - to build a resilient and sustainable business with a purpose, well into the future,” the company commented.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

Comments

Showroom

Condra Cranes
Condra Cranes

ISO-certified Condra manufactures overhead cranes, portal cranes, cantilever cranes and crane components: hoists, drives, end-carriages, brakes and...

VISIT SHOWROOM 
Weir Minerals Africa and Middle East
Weir Minerals Africa and Middle East

Weir Minerals Europe, Middle East and Africa is a global supplier of excellent minerals solutions, including pumps, valves, hydrocyclones,...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.089 0.151s - 180pq - 2rq
Subscribe Now