Thursday, March 3, 2011

Steinhoff eyes prospects in SADC

March 2 2011 - Business Report - By Samantha Enslin-Payne

Furniture group Steinhoff International is looking to expand its retail business in Africa, as it intends now to consolidate its European operations.

Chief executive Markus Jooste said yesterday that the group was looking at prospects in Africa, specifically among the Southern African Development Community (SADC) countries, where there were “one or two opportunities”.

South Africa could not be ruled out, but the local market was driven by credit sales, a very different model to Steinhoff’s European retail business, which is based on cash sales.

So far the group’s retail activities in Africa had been limited to automotive and building materials, he said, but the group had the same vision for Africa as it had in Europe.

Steinhoff announced in January that it intended to buy Conforama, which would give it immediate access and scale in the e9.3 billion (R89bn) French furniture market, and a presence in Switzerland, Portugal, Spain, Italy and Croatia.

Jooste said acquisitions in Europe were few and far between and once the Conforama deal was complete the group would consolidate and grow the European business organically.

Yesterday Steinhoff reported that headline earnings for the six months to December grew 5 percent to R1.6bn. Group revenue dipped 3 percent to R24bn. But with 51 percent of the group revenue earned in currencies other than the rand, the real success of Steinhoff’s underlying businesses was not entirely visible when translated and evaluated in rand reporting currency.

Retailing of household goods and building and automotive supplies accounted for 51 percent of total revenues, and manufacturing and sourcing accounted for 36 percent. On a geographical basis 49 percent of group revenue was generated from its southern Africa operations, 33 percent from continental Europe, 13 percent from the UK and the remainder in the Pacific Rim.

Steinhoff Africa increased turnover by 11.9 percent to R11.8bn, due to a strong performance from Unitrans. In particular Unitrans’ fuel and chemicals, and freight and logistics divisions benefited from increased volumes and reported strong growth. However, due to the drought affecting the sugar cane crop, the sugar and agriculture divisions’ volumes were marginally down.

Steinhoff Europe increased operating margins in retail and manufacturing and sourcing.

Trading conditions in the UK remained difficult with the closure of Reid stores in Ireland, as a result sales for the UK retail division decreased. However, profitability of the UK manufacturing unit was ahead of the prior year.

Steinhoff shed 15c to close at R24.61 on the JSE yesterday.