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IMPERIAL -- update on trading environment
20 November 2008
| SENS Note -- 20 November 2008 |
| IMPERIAL -- update on trading environment |
Given the current market conditions and global economic slowdown, IMPERIAL wishes to provide investors with an update on the prevailing conditions in the markets in which IMPERIAL operates and the impact thereof on the group over the first four months of the financial year.
Logistics Southern Africa
In Southern Africa, conditions in logistics are satisfactory despite a slowdown in demand from customers operating in consumer driven sectors. General freight movement, warehousing and supply chain services are holding up although some weakness is expected going forward based on the general slowdown in economic activity in a number of sectors.
Logistics Europe
In Germany, where the bulk of our European logistics operations are based, the government has made available an EUR500 billion stimulus package to support financial markets. Freight volumes in the inland waterway shipping division still remain relatively strong, except for coal and iron ore transport where a slowdown is being experienced. Containerised and bulk freight handling in the port terminal operations remained busy but is expected to slow down in the remaining part of the year. The automotive and steel logistics operations have slowed down and this is expected to continue in the new year. The recent acquisitions in Europe are being successfully integrated and new container capacity is coming on stream.
Car rental and tourism
The car rental market is under some pressure where volumes are weaker than anticipated mainly due to a slow down in domestic leisure and inbound travel which is impacting utilization. IMPERIAL is satisfied with the rental rates being achieved. Used car volumes and profit margins are slightly weaker than the previous year. Volumes and profitability in tourism operations remain acceptable.
Motor retail, import and distribution
Motor retail business saw a continuation and further deterioration of extremely weak trading conditions. With a high fixed cost component, these businesses are unable to deliver acceptable returns under current market conditions, although both distributorships and dealerships divisions are profitable. These conditions are expected to remain until sufficient interest rate reductions have been effected to restore the financial position of consumers. Aggressive cost reduction initiatives are being pursued in the group's businesses and generally throughout the industry. Commercial vehicle operations are performing better than passenger vehicles, but are also slowing down.
Insurance and banking
Underwriting results in the insurance division are satisfactory although the credit life business remains under pressure from lower policy sales and higher lapses. Notwithstanding the fact that the majority of investable insurance funds are in cash instruments, the overall results of the division are severely depressed by the performance of its equity portfolio in line with the market. Results from banking interests are negatively affected by higher bad debt provisions in the consumer market.
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