Hyperinflation haunts Old Mutual

OLD Mutual Limited has excluded the Zimbabwe profits from adjusted headline earnings (AHE) for the year ended December 31, 2023, citing hyperinflationary economic conditions that trigger earnings volatility.

AHE is the group’s primary profit metric.

The company, whose shares remain suspended from trading on the Zimbabwe Stock Exchange, expects AHE for the year ended December 31, 2023 to increase by 33% to R6,45 billion (US$347 million).

“We exclude the Zimbabwe profits from AHE as the economy is currently hyperinflationary, resulting in earnings volatility,” the group said in a trading statement for the year ended December 31, 2023.

“The main contributor to the higher level of growth in headline earnings relative to AHE is higher shareholder portfolio profits in the Zimbabwean business.”

The year-on-year inflation rate for the month of February 2024 stood at 47,6%, according to Zimbabwe National Statistics Agency.

The group said AHE growth was further bolstered by increased shareholder investment returns as a result of increased interest rates and a recovery in equity markets.

Old Mutual recorded robust results from operations (RFO) growth due to strong operational performance underpinned by exceptional growth in new business and value of new business as it continues to gain market share across its segments.

RFO, which is expected to grow by 26% to R9,21 billion (US$484,2 million) in the period under review, is the primary measure of the operating business performance of the group’s segments. Headline earnings are seen at R7,96 billion, up 36% in the comparable period.

Profit after tax likely increased to as much as R7,59 billion (US$406 million) from R5,23 billion (US$274,9 million) a year earlier.

The company is in the process of finalising its results for the year ended December 31, 2023, which will be released on the stock exchange news service of the JSE Limited on Wednesday next week.-newsday