Remgro results in a nutshell

Remgro reported poor results for the six months through December 2023, as its earnings plummeted and swung to a loss.

Remgro released its results for the six months ended 31 December 2023 today, which revealed that the company faced significant challenges in the second half of the 2023 calendar year.

“The second half of the 2023 calendar year continued to be marked globally as a period of macroeconomic and geopolitical instability, unrelenting inflationary pressures largely resulting from supply chain disruptions and weak economic growth,” the company said. 

“In the South African context, the period’s global pressures were exacerbated by the well-known

power supply constraints, breakdown in state infrastructure relating to transport and logistics, slow pace of economic and structural reforms, high interest rates and a general erosion of foreign investment confidence in the country.”

“The compounded effects of all these factors have been felt across Remgro’s portfolio companies, creating an incredibly challenging operating environment for its businesses to navigate.”

Remgro’s headline earnings decreased by 40.1% from R3.53 billion to R2.11 billion, and headline earnings per share (HEPS) are down by 39.1% from 626 cents to 381 cents.

This is largely the result of various corporate actions over the period, including –

• The negative fair value adjustment made by TotalEnergies Marketing South Africa on its Natref stock
• Remgro’s portion of a debt forgiveness gain amounting to R227 million, which was accounted for by Kagiso Tiso Holdings
• Grindrod’s equity accounted income of R60 million until its unbundling in October 2022.

However, even excluding these corporate actions, Remgro’s headline earnings decreased by 13.1%.

This is largely due to the R208 million loss Heineken Beverages contributed to Remgro’s earnings in the period and a lower contribution from CIVH.

Remgro’s total earnings, therefore, amounted to a loss of R2.39 billion compared to a profit of R3.95 billion in 2022. 

This decrease in earnings is mainly due to the decrease in headline earnings discussed above, the impairment of Remgro’s investment in Heineken Beverages (R3.49 billion) and Remgro’s portion of the impairments of Heineken Beverages’ goodwill that was created through the Distell/Heineken transaction (R1.82 billion). 

For the 2023 financial year, Remgro accounted for a profit on disposal of R3.38 billion in respect of the Distell/Heineken transaction. 

The decrease was partially offset by the profit realised on the disposal of the investment in DC Foods, Remgro’s portion of the profit realised by RCL Foods on the disposal of its Vector Logistics business and Remgro’s portion of the profit realised by Capevin on the termination of the Gordon’s Gin agreement.

In the six-month period, Remgro’s intrinsic net asset value per share as of 31 December 2023 was down by 4.6% to R236.95.

CEO Jannie Durand said, “Despite the evident challenges and the resulting negative performance delivered in this interim period, these results are reflective of a point in time.”

“As long-term investors, we avoid static evaluations, especially during periods of consolidation.”

“We believe in the value that will be created through the evolution of our portfolio and, as a matter of priority, we remain focussed on implementing interventions to improve performance at our core assets.”

In a nutshell