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Imperial Logistics taps Africa for future growth

By Xolisa Phillip, in Johannesburg
Posted on Tuesday, 12 May 2020 15:24

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Vehicles drive on a main highway with shipping containers in the background, in Cape Town, South Africa, Friday, Sept. 27, 2013. (AP Photo/Schalk van Zuydam)

Imperial Logistics is exiting its European shipping business for R4.65bn to ramp up the company’s efforts of becoming the gateway to Africa.

Imperial is the leading distributor of pharmaceutical and consumers goods in Southern, East and West Africa. The company acquired its interest in the German-based shipping business in 1999, but Europe is no longer the focus of its core strategy – Africa is.

Imperial wants “to grow our African footprint and align our international portfolio to position the group as the ‘gateway to Africa’ in the medium to long term,” it said in a market announcement this week.

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The outcome will be an integrated logistics and market access focused on the region and one that capitalises on the company’s capabilities in “the healthcare, consumer, chemicals, industrial and automotive industry verticals.”

A big part of this plan is underpinned by investment “in new areas that enhance our African growth vision.” An important aspect of this will be Imperial looking into growth opportunities and client relationships that support trade flows into and out of Africa.

The company will hold onto its interest in the South American shipping business.

Non-core out of favour

The  buyer of Imperial Logistics’ European shipping business consists of community held entities: Stadtwerke Köln GmbH, the City of Cologne and Rhein-Erft-Kreis.

The business is based in Duisburg, Germany. It operates inland waterway transportation in Europe providing services in dry bulk, liquid, chemicals and gaseous products.

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Although the European shipping business contributed healthy sums towards group revenue and posted an operating profit in the 2019 financial year, Imperial Logistics considers it non-core to its strategy.

“Imperial has adopted a phased approach in the disposal of its shipping business. The South American shipping business will be continued on a stand-alone basis, but will remain available for sale,” according to the company’s statement.

There are several regulatory requirements that the transaction has to fulfil, including gaining the approval of competition authorities and shareholders.

Imperial Logistics will use the proceeds from the transaction “to optimise … [its] financial position and, where appropriate, reduce Imperial’s overall existing debt.”

Africa a compelling prospect

In the 2019 financial year, Imperial’s Africa operations contributed 25% to group revenue and 31% to group operating profit. Its healthcare business in West Africa “delivered an excellent performance.”

Also in 2019, Imres, the Dutch-based wholesaler of pharmaceutical and medical supplies which operates in the international medical relief industry, benefited from a record order book.

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In 2014, Imperial Logistics bought a 70% interest in Imres for €45m cash. Imres primarily services Africa’s emerging economies. It specialises in pharmaceuticals, medical kits, disposables, hospital equipment and related medical products.

It counts among its clients health ministries in developing countries, non-governmental organisations, the United Nations and hospitals.

Imperial Logistics considers its rest of Africa operations as strongly positioned. Its South Africa business also made a positive contribution to group revenue.

However, the outlook in Europe is poor. The company said trading conditions in Germany had deteriorated because of declining manufacturing in chemicals and steel.

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