Walmart-owned retailer Massmart, whose brands include Makro and Game, says it will not pay an interim dividend after plunging to a net loss of R832.4m in the six months to end-June as costs rose faster than sales and finance charges trebled.

Tough trading conditions in SA and other African markets weighed on sales growth and placed pressure on margins, with certain costs rising more than expected, Massmart said on Thursday.

“In SA, the severe load-shedding in February and March compounded the situation and undoubtedly contributed to the contraction in the first quarter’s GDP … National elections in two of the sub-Saharan countries where we have stores, as well as extreme currency weakness, contributed to the uncertainty and trading challenges.”

Massmart said sales in the first half grew 5.5% to R43.8bn, but this was countered by faster cost growth, a higher depreciation and amortisation charge, asset write-downs, foreign exchange losses and a surge in finance costs. 

Net finance costs lifted to R909.6m from R299.7m a year before as borrowings rose sharply.

Massmart, whose dividend policy is to pay an interim and final dividend based on earnings “unless circumstances dictate otherwise”, said it would not pay a half-year dividend because of its losses.

The group said that for the 33 weeks to August 18, total sales were 5% up at R55.8bn, with comparable-store sales up 3.2% and product inflation at about 2.6%.

“It is difficult to envisage the South African consumer economy improving in the near term, and negative risks seem heightened in the international geopolitical and economic situation,” the company said.

“Massmart’s profitability has always been heavily skewed towards the second half of the financial year and particularly the fourth quarter, which includes Black Friday and the festive season, which makes near-term financial guidance difficult.”

Assuming the domestic economy does not deteriorate more, Massmart said it expects headline earnings per share for the year to December to be at least 50% below the prior year.

The company’s new CEO, Walmart executive Mitchell Slape, will take over from Guy Hayward in September.