Imperial Logistics restructures its South African business further

3rd June 2019

By: Irma Venter

Creamer Media Senior Deputy Editor

     

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Faced with “increasingly competitive and challenging economic conditions” in South Africa, Imperial Logistics (Imperial) says it is intensifying the restructuring of its South African business.

As part of this process, Imperial will further rationalise its loss-making Consumer Packaged Goods (CPG) business by exiting and selling certain assets, while it will also aim to retain key contracts and accommodate these in other business units under a different commercial model.

CPG is responsible for around 20% of South African revenue.

The restructuring won’t see Imperial exiting the consumer industry vertical in South Africa, the company explained on Monday, noting that it rather pointed to the rationalisation of a multiprincipal distribution capability that had become unviable.

The rationalisation of CPG will result in an impairment of between R1-billion and R1.4 billion post-tax (including retrenchments and exit of leases), with CPG to be classified as a discontinued operation for the financial year ending June 30.

“We are currently in discussions with key stakeholders to find the most effective and appropriate solutions for existing staff, clients and contracts, during which we will make every effort to minimise the impact on our staff and clients,” noted the company.

Excluding the CPG business, the South African division has grown operating profit by 5% over the last three years.

The South African business has also removed around R140-million (excluding CPG) of fixed overhead costs, which has resulted in a one-off cost impact of roughly R25-million in the current financial year.

Imperial said its South African business faced margin pressures from customers and principals, high unemployment, low economic growth, tax rate increases, static household income and load-shedding, which continued to weigh on trading conditions and sentiment.

While the South African elections were concluded smoothly and despite the improvement in business sentiment, Imperial believed it would take some time before the economy benefitted from any fundamental policy reforms, or showed real growth.

Imperial operated three business units, namely South Africa, African Regions and International.

The International division has been hampered by reduced volumes, one-off costs associated with material business restructuring, and the one-off impact of the implementation of the new Worldwide Harmonized Light Vehicles Test Procedure, which have resulted in significantly lower vehicle production volumes in the automotive business, and depressed profitability in Palletways.

The Logistics International portfolio could see further disposals in this division in the short-to-medium term of non-core and low-return-on-effort businesses.

 

Edited by Creamer Media Reporter

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