Massmart profit drops 26% on currency pressure

27 August 2015 - 11:11 By Liezel Hill and Janice Kew
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A trolley being pushed down a supermarket aisle.
A trolley being pushed down a supermarket aisle.
Image: Thinkstock

Massmart Holdings Ltd., the food and goods wholesaler controlled by Wal-Mart Stores Inc., said first-half profit fell 26% as price competition curbed margins and other African currencies weakened against the rand.

Profit excluding one-time items fell to R269.3 million from R364 million a year earlier, the company said in a statement on Thursday. That compared with a 26% decline a year earlier. Sales rose 9.1% to R39 billion.

Unemployment of 25%, power cuts and rising fuel prices are putting pressure on shoppers to cut down on major purchases. Consumer confidence dropped to a 14-year low in the second quarter of this year. Massmart faces strong competition throughout its business, it said.

“All participants — suppliers, service providers, retailers and wholesalers — are competing keenly for profitability and market share, causing heightened margin pressure across the retail value chain,” Massmart said.

The company made a net foreign exchange loss of 106.7 million rand, “mostly as a result of the weakening of the average basket of African currencies against the rand,” it said. The weakening of the local currency against the US dollar exacerbated the loss.

The shares have decreased 19% this year, the biggest decliner on the FTSE/JSE Africa General Retailers Index.

- Bloomberg

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