UPDATE 1-S.Africa's Massmart sees up to 25 pct drop in H1 profit

Mon Feb 18, 2013 10:49am EST

* Headline EPS to be range 312-341 cents vs 416 cents

* Results hit by transaction costs

JOHANNESBURG Feb 18 (Reuters) - Walmart's South African unit, Massmart Holdings, said on Monday first-half profit likely fell by as much as 25 percent, hit mainly by costs related to its deal with the world's biggest retailer.

Massmart said headline earnings per share would come in between 312 cents and 341 cents for the six months to end-December, or as much as 25 percent lower than the 416 cents it reported a year earlier.

A South African court last year ordered Massmart to double a planned fund to develop local suppliers to 240 million rand ($27 million) to win regulatory approval for Wal-Mart's acquisition.

Wal-Mart paid $2.4 billion for 51 percent of Massmart.

Excluding that cost, the company said headline EPS would have shown single-digit growth, reflecting tight margins from an aggressive cut-price strategy to double market share in food sales.

Headline EPS, the main measure of profit in South Africa, excludes certain one-time items.

Massmart, South Africa's third-largest retailer by value, is expanding into food retailing, pitting it against dominant grocers such as Shoprite and Pick n Pay.

The company aims to take its grocery market share to as much as 20 percent in the next few years from 10 percent now.

Massmart is due to report the full results on February 28.

Shares of Massmart finished up 1.8 percent at 189.26 rand before the announcement.

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