Massmart results defy slump

Chief executive Grant Pattison said the group had had its most difficult year since the company's listing 10 years ago and there was no question that Massmart's earnings were affected by rand volatility over the past 18 months.

"Given our cyclical product mix, however, the business has performed reasonably through the recession and is now positioned to perform well in the economic upturn ahead," he said.

For the 34 weeks to February 21, total sales rose by 6.7 percent and comparable sales by 0.4 percent, showing an encouraging turnaround that seems to have begun in mid-December.

Headline earnings a share declined 19.5 percent in the half-year period. With currency volatility continuing to distort the group's African business performance, management focused on the margin, costs and stock control.

"While operating profit declined by 15 percent, the pre-forex (foreign exchange) decline was 5.9 percent and comparable expense growth was 2.5 percent," the group said in a statement.

The number of full-time equivalent employees increased by 1.5 percent in the 26 weeks. An interim cash dividend of R2.52 a share was declared.

Masscash, the group's wholesale and retail cash and carry business, reported a 13.1 percent growth in sales, while trading at Massbuild (Builder's Warehouse) increased by 8.6 percent as a result of improved prices and product offerings as consumers looked to maintain their homes.

Both divisions delivered a 2.6 percent hike in trading profit.

Warren Buys, a portfolio manager from Cadiz Asset Management, said the areas in Massbuild that had been doing better were more the lifestyle hardware side, not the commoditised building materials sold by Builders Trade Depot and Cashbuild.

"New home builds still seem to be under pressure," Buys commented.

Makro showed a 1.5 percent increase in store sales and a 10.5 percent decrease in trading profit. "Makro had a tough time due to top line pressure from rapidly falling food inflation and deflation in general merchandise due to the stronger currency," Buys said.

Although Massdiscounters' Game performed well to grow sales, trading profit and divisional trading profits were negatively affected by the economic slowdown in Africa and weaker local currencies resulting in products becoming more expensive.

The division's sales grew by 0.4 percent with a 14.5 percent decrease in trading profit.

Buys said the short-term trend for the group indicated that things were improving. "We could very well see a better year-end result," he said.

Shares of Massmart rose 2.39 percent to R90.10.