29 August 2017

Namibia: Fishing Quotas Continue to Haunt Bidvest

AN analyst at Simonis Storm, Megameno Shetunyenga, on Saturday said Bidvest Namibia's "very disappointing" financials are haunted by past challenges, which include fishing quota allocations.

The commentary comes days after the group announced its financial results for the year ended 30 June 2017, and in which the company said it had a disappointing year in all its trading segments.

The financials indicate that Bidvest's trading profit went down by 68,6% to N$92,5 million. Revenue declined by 2% to N$3,8 billion, and cash generated by operations went down by 51,7% to N$189,1 million.

"In addition to the tough Namibian economic environment, we see the challenges that haunted the group in the past to continue into the future. We concur with management, and do not foresee any turnaround soon. These challenges, in our view, are the uncertainty of quota allocations and the threat of new foreign and public sector entrants in the local fishing market, prevailing operational inefficiencies in the food and distribution division, and a seemingly poorly executed capital allocation strategy with value destructive acquisitions," said Shetunyenga.

Shetunyenga added that they hoped to see a turnaround in the food and distribution division, but clearly that did not come through the numbers.

Bidvest said its fishing division continued facing severe adverse external market factors and environmental conditions, as well as a shortage of quota allocations.

All the other divisions experienced pressure on revenue "due to the recession in Namibia."

"The fishing division continued to be challenged by negative factors, and additional legislative levies. Average hard currency prices decreased by 7,5%, which was influenced by smaller fish sizes and a drop in actual prices, while the exchange rate also had a 6,5% negative impact on revenue. During the financial year, a reduced quota allocation was available, and therefore this division's gross profit reduced significantly."

The automotive division disappointed mainly because the new vehicles market plummeted due to lower consumer spending. The used vehicle market as a result improved and showed good performance, although this did not make up for the overall negative performance.

Freight and logistics achieved lower revenues, but managed to keep trading profit almost in line with the previous year through cost savings. There are still no prospects of any major projects on the immediate horizon.

Food and distribution revenue did not grow in line with expectation. However, the main problem remained stock-related costs, although improvement in costs started showing in June.

The economic climate affected all entities in the commercial and industrial services and products division negatively, except for Minolco.

The effective tax rate is significantly higher than the previous period "due to losses incurred in certain statutory entities, for which no deferred tax assets were raised."

"The group remains carefully optimistic that profitability will regain momentum in the near future, despite the recessionary economic climate," Bidvest said in a statement last Friday.

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