Publications
Partners
Johannesburg - S&P Global Ratings warned on Thursday of a weakening profitability and organic growth outlook for Naspers [JSE:NPN].
S&P Global Ratings revised the outlook of Naspers from stable to negative in the fiscal year ended March 31, 2016.
Naspers is Africa’s largest company by market value, has investments and operations in more than 130 countries as well as a 34% stake in Chinese internet giant Tencent.
S&P anticipated that current economic conditions would hinder profitability through to 2017.
Slower organic growth in Naspers' cash-generative video entertainment operations and its limited ability to quickly adjust its cost base, which bears significant exposure to the US dollar, are the main reasons behind the expected weaker performance.
S&P stated that the deteriorating economies in South Africa and Sub-Saharan Africa, coupled with the resulting devaluation of local currencies, have dragged down consumer confidence and demand for video entertainment, especially in Sub-Saharan Africa.
“Despite the current cyclical challenges in video entertainment, we think that this business is solid” S&P said.
“Long-term underlying trends, such as low penetration of pay TV in Africa and positive growth prospects over the long run in the region, will in our view support the division's development,” S&P added.
S&P anticipate the division to return to organic growth from 2018.
Amidst the outlook revision from stable to negative, S&P also affirmed Naspers' 'BBB-' long-term ratings on the company.
Naspers shares traded 1.63% lower on R2 362.61 in late afternoon trade on Thursday, with the company's market remaining firmly at over R1 trillion.
* Fin24 is part of Media24 which is owned by Naspers.
Read Fin24's top stories trending on Twitter:
