South African grocery retailer Massmart has posted a drop in first-half profits on the back of costs from the sale of a majority stake in the business to Wal-Mart Stores.
Massmart today (25 August) reported a 25.8% drop in net income to ZAR838.7m (US$116.1m) for the first six months of the year.
Headline earnings per share for the period stood at ZAR4.33 compared to ZAR5.67 last year.
Operating profit fell 13.7% to ZAR1.61bn. Wal-Mart’s bid to acquire a 51% stake in Massmart was approved by South Africa’s competition watchdog in May, subject to conditions, including an order that the two companies pledge ZAR100m for a fund to support local suppliers.
The ruling remains subject to a court appeal by the South African government, which wants Wal-Mart and Massmart to improve the supplier fund.
Excluding costs from the Wal-Mart deal, Massmart said its half-year operating profit increased 10.3% to ZAR2.06bn.
The company also posted an 11.6% increase in sales to ZAR52.95bn.
Massmart CEO Grant Pattison said he expected the benefits of the relationship with Wal-Mart would only show through in the group’s 2013 financials and beyond.
“The process of integration with Walmart has just begun, but there is certainly plenty of medium- and long-term opportunity on the African continent to save people money so they can live better,” Pattison said.
“Despite the difficult and uncertain socio-political and economic environments, both locally and globally, we believe we have the plans in place to deliver another solid performance in the year to June 2012.”