Massmart 21-week total sales growth 13.3%

Twelve-month rolling sales inflation was running at 9.3%, it said.

CEO Grant Pattison told the group's annual general meeting that within the group's portfolio it is experiencing strong performances from Masswarehouse and Masscash benefiting from steady volumes in the Food and Liquor categories.

"We are pleased with the performance of Massdiscounters, where the Game brand in South Africa has benefited from the consumer's shift to value and the African business continues to perform strongly and is benefiting from a weaker rand.

"On the other hand Massbuild is beginning to show signs of the extent to which it is exposed to the dynamics of the residential property market: higher interest rates, lower property prices and tighter credit granting criteria by the banks," he said.

Total and comparable sales growths in each division are 13.5%, 15.8% (0.5% inflation) in Massdiscounters; 16.1%, 12.2% (10.4% inflation) in Masswarehouse; 2.6%, -1.2% (10.6% inflation) in Massbuild; and 15.7%, 16.6% (15.4% inflation) in Masscash.

He added that while Massbuild has now successfully digested all aspects of the merger, as a result of the slowing sales, profits in that division are below the prior year.

Excluding the positive effect of unrealised foreign exchange translation gains, profit margins in the remaining three divisions are currently at or above those for the prior comparable period.

Despite the international financial turmoil foreign share ownership in Massmart was 60.5% as at September 2008, he noted.

With 29 months passing since South African interest rates first began increasing, the group has so far performed well through the cycle. The first drop in CPIX in September 2008 was encouraging and with the data clearly showing a slowing economy, the company is anticipating the first reduction in interest rates, signalling the turn in the economic cycle, in the first or second quarter of 2009.

However, should there be any further financial shocks that may cause interest rate cuts to be delayed towards the end of 2009, the risk of expense growth exceeding sales growth rises, he noted.

"We believe that the medium- to long-term South African consumer market remains sound and we continue with our plans to invest for growth, while operating the business as tight as possible. In the short term we are focused on holding net operating margins to June 2009, which is most dependent on our ability to minimise the downside in Massbuild," he said.

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