Karooooo plans goodwill impairment amid Mozambique upheaval
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Nasdaq-listed Karooooo, which provides vehicle-tracking and fleet-management services, will provide for a potential impairment of goodwill in its Mozambique operations for the fiscal year ended February 2025 due to the political upheaval gripping the southeast African nation.
Mozambique has endured months of tension following disputed Oct. 9 elections and the Decide Platform, a local group tracking the violence, says more than 350 people have died.
While demonstrations against President Daniel Chapo, who was declared the winner of the vote, have dissipated over recent weeks, sporadic unrest continues.
"There’s been a serious impact on our business and on our customers’ businesses" in Mozambique, Zak Calisto, Karooooo’s founder and chief executive, said in an interview. "We’ve had to take a few thousand vehicles off our platform because the vehicles were burned down, the warehouses aren’t working and the factories aren’t working.”"
The turmoil has cost the country an estimated 3% of gross domestic product and affected a number of other companies.
They include Grindrod, which has facilities at the country’s biggest port, South32, the operator of the region’s biggest aluminium smelter, and graphite producer Syrah Resources, which supplies Tesla and declared force majeure.
Formerly known as Cartrack, Karooooo started out as a vehicle track and trace business in South Africa, home to about three-quarters of its 2-million strong subscriber base.
The company suspended billing in Mozambique in mid-November for two months to support customers through the unrest, Calisto said. He doesn’t expect the potential goodwill impairment to materially impact the company’s annual earnings or cash flow because a marginal proportion of the company's profit comes from Mozambique, one of 25 countries across five continents where it does business.
"We will take a prudent approach to do a goodwill impairment," in line with international accounting standards, he said. "But is the business still worth a lot? Definitely. It’s still giving very good free cash flow, it’s still got good profitability, it’s still a great business and it’s still very important to us."
Karooooo’s Mozambique operation is of strategic importance in supporting customers in South Africa with cross-border businesses.
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