Artwell Dlamini
2 December 2008
Johannesburg — ANALYSTS expect Bidvest to keep feeling the effects of the global economic downturn, but they say the group is ready to make acquisitions because it is a well managed business.
Sanlam Investment Management senior equity analyst Andrew Kingston said yesterday Bidvest would not escape the global economic crisis unscathed. Cavan Osborne, an analyst at Old Mutual Investment Group (SA), echoed that opinion.
Kingston said the company was "stable" although overall earnings growth, which had generally been in double digits , might slip into single-digit territory.
An analyst who did not want to be named said consensus forecasts indicated that earnings growth would come close to 10%. The analyst said this earnings growth performance was being achieved under adverse market conditions.
Osborne expected Bidvest to carry on making acquisitions.
Bidvest said yesterday the international financial crisis had resulted in many good assets becoming considerably cheaper.
"This will present significant opportunities for Bidvest and the group may become more aggressive in terms of acquisitive activities," said the company. "Overall, the group should achieve modest positive growth for the six-month period ending December 31 2008."
It said yesterday its closure of The Barton Meat Company, a food services business, included about R80m in unexpired lease cost obligations.
The company said Bid Auto, another troubled business, would be down "substantially at attributable earnings level".
Bidvest said some of its other divisions, such as Bidfreight, had seen volume declines in some areas, but these declines had not been material to date.
Asia-Pacific operations were also expected to slow down. In New Zealand, real growth continued in turnover, but was below previous years' rates of growth.
In Singapore, economic conditions had slowed considerably, particularly in hospitality and tourism.
As far as Bidpaper Plus was concerned, rand weakness had driven cost increases in raw materials. This had been difficult to pass on to customers. If the rand weakened further, margins would come under renewed pressure, said Bidvest.
Up until now consumer spending patterns had affected retail and fast-food volumes to a limited extent, but a further reduction in volumes would start to affect volumes in its labels and packaging factories.
Bidvest said the 2010 Soccer World Cup activities would start to benefit the division as spending moved away from infrastructure to the sporting event, as well as the hospitality sector.
Bidvest's South African growth rates were also not tied specifically to the South African economy.
For instance, the group had already won some "very attractive tenders" for the World Cup that would benefit it in the period ahead.
Kingston said Bidvest's diverse business was defensive by nature and cash-generative.
He said management's ability to implement plans was "very important".
Kingston said the company also was able to adapt to changing economic environments faster than its competitors.
Osborne expected the company to entrench itself strongly in its various industries with increased market share.
He said Bidvest was an "exceptionally well managed company" .
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