Johann Rupert’s Remgro feels the pain

Remgro expects a massive dip in earnings for the six months through December 2023, as the company took a hit from Heineken’s write-down of the value of its South African businesses, including Distell.

The company – chaired by billionaire Johann Rupert – informed shareholders this morning that Remgro’s headline earnings per share (HEPS) are expected to decrease by between 35% and 45%.

HEPS are, therefore, expected to be between 344 cents and 407 cents compared to the HEPS of 626 cents reported for the six months ended 31 December 2022.

This is largely due to the effect of corporate actions implemented in the recent past, the majority of which are non-recurring items. 

The company’s difficult operating environment, particularly in relation to the trading results of Heineken, also contributed to the decline in headline earnings.

These corporate actions and their impact on headline earnings include the following –

  • The IFRS 3 amortisation and depreciation charges relating to the additional assets      identified when Heineken obtained control over Distell and Namibia Breweries
  • Remgro’s portion of the negative fair value adjustment made by TotalEnergies Marketing South Africa on its Natref stock due to Natref being classified as held for sale in terms of IFRS 5
  • Remgro’s portion of the transaction costs incurred relating to the Mediclinic Group acquisition
  • Remgro’s portion of a debt forgiveness gain that was accounted for by Kagiso Tiso in 2022 as part of the disposal of its investment in Actom Investment Holdings 
  • Grindrod’s equity-accounted income until its unbundling in October 2022.

However, Remgro’s HEPS, adjusted for corporate actions, are expected to be higher at between 492 cents and 533 cents. This is still a decrease of between 8% and 15% compared to the prior period

This decrease is largely driven by –

  • The loss contributed by Heineken compared to the profit contributed by Distell in the comparative period. Heineken’s volumes were impacted by lower industry growth, load-shedding, a shift from premium to mainstream and a challenging competitive environment. Margins were also negatively impacted by non-recurring expenses related to integration and supply chain challenges
  • A lower contribution from Community Investment Ventures Holdings, mainly due to  higher finance costs resulting from increased interest rates
  • A special dividend received from FirstRand of R154 million in the comparative period

Remgro’s results for the six months ended 31 December 2023 are due to be released on 19 March 2024.