Headwinds Threaten Staggering Earnings Crash For Africa’s Top Firm

By  |  June 22, 2023

South African multinational conglomerate Naspers has issued a cautionary message to shareholders, indicating a significant projected decline in its forthcoming financial results. Anticipating a substantial blow, Naspers forecasts a staggering drop ranging from 75 percent to 82 percent in its headline earnings.

Naspers, notably Africa’s most valuable company with interests in technology and multimedia both locally and globally, foresees a decline in headline earnings per share for the fiscal year ending on March 31, 2023. The anticipated drop is expected to range between 420 and 459 US cents, resulting in a projected figure of 559 cents.

The firm attributed the anticipated decline to the challenging operating landscape marked by substantial geopolitical and macroeconomic uncertainties during the fiscal year. These factors, BusinessTech reports, had a notable impact on the company’s operations, resulting in reduced profitability across key segments, with Chinese giant Tencent, one of Naspers’ main hits, being particularly affected.

In the past year, Naspers made a strategic decision to decrease its ownership stake in Tencent from 29 percent to 26 percent. The proceeds generated from these sales were subsequently utilized by the company to repurchase its own shares.

Furthermore, Naspers continues to pursue profitability in its e-commerce division, with the goal of achieving this milestone by the fiscal year 2025. The group maintains it is focused on implementing strategies and initiatives to drive growth and improve financial performance in this segment.

“Our focus remains on building long-term sustainable value in local marketplaces with peer-leading growth and materially improving profitability,” the group said.

“After years of investment and significant growth, our businesses have scaled meaningfully and each segment now demonstrates a clear path to profitability. We are committed to achieving consolidated e-commerce profitability during the first half of FY25.”

Throughout the period, Naspers reported positive growth and improved profitability within its consolidated e-commerce portfolio. However, the overall earnings of the company were primarily affected by a decline in profit contributions from its associate companies, with Tencent being a key contributor to this impact. Despite the challenges, Naspers remains committed to optimizing its earnings and pursuing strategies to strengthen its financial performance in the future.

Lower contributions from equity-accounted investments, Higher impairment charges, and lower gains from the sale of assets are responsible for the earnings dip, according to Naspers, which also pulled out of some businesses.

Naspers confirmed the successful completion of the divestment and receipt of proceeds from its exit of the Russian classifieds business, Avito, in October 2022. Consequently, the financial results associated with Avito are categorized as discontinued operations for the entire reported period. This strategic move allows Naspers to focus on its core operations and allocate resources more efficiently towards its ongoing ventures.

Naspers had previously announced its intention to withdraw from the OLX Autos business.

“The results of Avito and those Autos businesses, where either a future sale is deemed probable or has been closed down by 31 March 2023, will be presented as discontinued operations in the current and prior reporting periods,” the company noted.

The group has reiterated that it is currently in the process of finalizing the exit from this particular venture. By divesting from Autos, Naspers aims to streamline its portfolio and concentrate its efforts on other strategic initiatives that align more closely with its long-term objectives.

Earlier this year, Naspers nixed its African venture capital arm Foundry. The shuttering of Naspers Foundry—which until its abrupt termination in March was not only South Africa’s largest venture capital (VC) fund but also one of the deepest pockets in African tech—has left question marks in its wake. It’s drawn critical appraisal from industry insiders, some of whom say it didn’t quite live up to expectations.

Naspers made its name as a prolific global tech investor, racking up wins from successful early bets in foreign tech companies such as China’s Tencent, India’s Flipkart, and several others. However, efforts to replicate some of that success on home soil have proved challenging.

Featured Image Credits: Depositphotos

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