Steinhoff Profit Rises 24% on U.K. Furniture Stores (Update3)

By Garth Theunissen

March 5 (Bloomberg) — Steinhoff International Holdings Ltd., South Africa’s largest furniture maker, said first-half earnings rose 24 percent after its U.K. store chains returned to profit and its car unit rented more vehicles.

Steinhoff fell 2.8 percent in Johannesburg trading even though the figures “surprised on the upside,” according to David Shapiro, a fund manager at Sasfin Holdings Ltd. Net income climbed to 1.46 billion rand ($186 million) in the six months through December from 1.27 billion rand a year earlier, the Johannesburg-based company said today in a statement.


Operating profit at household-goods and building-supply store chains almost tripled after Steinhoff changed product ranges, improved staff training and stepped up advertising at its U.K. furniture shops. Profit gained 21 percent at the auto division, which has 72 dealerships in southern Africa selling cars made by companies from General Motors Corp. to Daimler AG.

“Profit on household goods was mainly due to the turnaround to profitability in our U.K. retail operations,” Chief Executive Officer Markus Jooste said in a telephone interview. “Profit on the motor-vehicle division was largely driven by the services division and our car-rental business.”

More Sales

First-half sales gained 15 percent to 20.6 billion rand. They rose 11 percent to 10.3 billion rand in southern Africa, the source of half of the total, and advanced 44 percent to 5.1 billion rand in Europe outside the U.K. Operating profit climbed 18 percent at the furniture-making unit.

Steinhoff fell 50 cents to 17.20 rand. The stock has slid 11 percent this year, cutting the company’s market value to 23.2 billion rand.

“Retailers in general have been taking a pounding,” Shapiro said. “Steinhoff has also changed its strategy toward being a distribution company, and the market is still digesting that.”

The furniture maker, which has plants in low-cost eastern European nations such as Poland, generates 50 percent of sales in currencies other than the rand. The South African currency has slid 12 percent against the dollar this year, the worst performance among 16 monies tracked by Bloomberg. That adds to the value of foreign revenue on conversion to rand.

“This augers well for rand-denominated profitability in respect of the remainder of the current financial year,” the company said in the statement.

Hungary, Germany

Steinhoff’s regional diversity leaves it “well positioned to weather a slowdown in global demand for durable goods,” Jooste said. The company, which bought U.K. furniture retailer Homestyle Group Plc last year, plans to expand its South African, British, Hungarian and Germany retail units, he said.

Chairman Bruno Steinhoff will give up his executive duties on April 1 and will remain as a non-executive director on a consulting basis, the company said. He started the company in 1964, distributing furniture from eastern Europe to the western part of the region.

Steinhoff said it’s installing generators to combat a nationwide power shortage in South Africa that may affect its operations in Africa’s biggest economy.

To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net