Steinhoff sets its sights on Iberian Peninsula
March 3, 2004
By Max Gebhardt
Johannesburg - Furniture group Steinhoff International is looking to the Iberian Peninsula as its next area of expansion, says chief executive Markus Jooste.
Speaking at the interim results presentation yesterday Jooste said although the company had pulled back from selling into the French market it was now rather looking at setting up a distribution network in France to service Spain and Portugal.
But he said there was nothing specific that Steinhoff had in mind just yet. The expansion in Europe comes in to top off a drive into Africa, where it has recently set up shop in Angola and Mozambique, and expansion in South Africa.
Jooste said the e123 million (about R1.01 billion) raised recently would largely be allocated to South Africa although he would be keeping a war chest in Europe in case opportunities appear in Spain or Portugal.
Steinhoff, which was the joint winner of last year's Global Awards sponsored by Business Report, Barloworld and PricewaterhouseCoopers, derives over 80 percent of its revenues outside South Africa with the European Community being the main geographical contributor.
This means revenue and earnings were crimped by the rand's appreciation against the euro, Steinhoff's main operating currency. In rand terms, revenue growth showed only a marginal improvement to R5.3 billion while in euro terms the growth was 22 percent.
Net profit for the period in rands rose 14 percent to R500 million but in euros it climbed an impressive 37 percent.
A focus on driving out inefficiencies in the supply chain helped the average operating margins across the group to improve by 70 basis points to 11.1 percent.
But the capital raising exercise, which saw the placement of 145 million shares with international investors, meant headline earnings improved only 2 percent to 53c a share because of the increased number of shares in issue. This was marginally below forecasts of 54.4c a share according to Bloomberg.
However, Jooste and his team were very proud of the fact that despite an additional 10 percent more shares in issue the group was able to increase not only earnings a share but also the group's net asset value, which rose to R5.60 a share.
The German region, according to Jooste, had remained hampered by the stagnate German economy but it had managed to improve margins during the period and gained market share.
There were, however, encouraging signs starting to emerge from Germany with sales increasing on a like-on-like basis for the first time in three years, Jooste said.
The other regions in Europe, mainly the UK and Benelux regions, had experienced difficult trading conditions but remained profitable.
The southern African operations had enjoyed a buoyant retail sector locally and the group was now looking towards upstream activities like the acquisition of minorities in PG Bison to provide an earnings boost for the group.
Other activities for South Africa include the building of a sawmill in George.
"We believe in South Africa as an export country and we as a board support them [the operations] and are giving them capital to grow," Jooste said.
About 30 percent of the Southern African region's revenue of R1.4 billion comes from exports to the European Community and the US.
No interim dividend was declared and Jooste expected headline earnings to show growth for the full year. Steinhoff's share price gained 6c to close at R8.94.
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