CMH sales hit by high interest rates

COMBINED Motor Holdings (CMH), a vehicle dealer, will report depressed year-end earnings as deteriorating vehicle sales bite due to high interest rates, analysts said.

COMBINED Motor Holdings (CMH), a vehicle dealer, will report depressed year-end earnings as deteriorating vehicle sales bite due to high interest rates, analysts said.

The company warned on Friday that headline earnings per share - a profit measure - was expected to slump between 40 percent and 50 percent on 775.6 cents reported at the same time in the past year.

"Clearly interest rates and deteriorating new vehicle sales are having an impact on the company," said an analyst.

All three CMH business units - motor retail, car hire and the marine and leisure unit - have earnings aligned with the movement in interest rates.

New vehicle sales have been in a negative territory for the past 10 months running, with March sales recording a 17,5 percent decline - one of the sharpest drops on record.

Used vehicle sales and prices are also under pressure, with supply outstripping demand.

"The used car market has been under quite a bit of pressure in the past few years. Deflation in the new car market and increased supply is putting downward pressure on prices," said Chris Hart, an economist at Investment Solutions.

Noting that there was not much reliable data to gauge the used car market, Danelee van Dyk of Standard Bank, agreed that the used car market was under pressure.

"With inflation in the new car prices dropping, consumers would more likely be lured into the lower-end of the new car market than buy a second-hand car," she said.

The tough trading environment is expected to continue until the Reserve Bank changes its interest rates strategy.- I-Net Bridge

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