* Diluted headline EPS at 451.6 cents vs 390.8 cents
* Sales up 13.6 percent to 67.4 bln rand
* Plans 85 new stores, create 5,700 additional jobs
* Sees little change in market conditions (Adds funding, analyst reaction)
By Tiisetso Motsoeneng
JOHANNESBURG, Aug 24 (Reuters) - Shoprite, Africa's biggest grocer, expects to borrow about 2.5 billion rand ($338 million) in the next two years to fund an expansion drive in preparation for a recovery in consumer demand.
The Cape Town-based company, which also posted a 16 percent rise in full-year profit on Tuesday, said it would spend 3 billion rand over four years on distribution centres and technology.
Shoprite also plans to add 85 new stores in the next 12 months, creating 5,700 jobs, mainly in its home market.
"We're budgeting for 2.5 billion rand (in external financing needs)," Carel Goosen, Shoprite deputy managing director, told an investor presentation.
"Although the after-effects of the recession will be felt for a long time to come, the group is investing heavily for the recovery when it comes," the company said in a statement.
South Africa emerged from its first recession in 17 years in the third quarter of last year.
"WORRIED ABOUT JOB LOSSES"
But Shoprite gave a cautious 2011 outlook, citing job losses and high levels of household debt.
"We're very worried about job losses ... economists expect little relief for consumers in the coming months; we agree with them on that," Shoprite Chief Executive Whitey Basson said.
South Africa's retail sales rose for a sixth consecutive month in June, helped by World Cup spending, but the increase was weaker than expected.
Shoprite said headline earnings per share increased 16 percent to 451.6 cents in the year to end-June, as low interest rates and tentative economic growth encouraged its mainstay South African customers to spend more.
"It was a good set of results. They managed to make some gains on the margins front," said Danie Pretorius, an analyst at RMB Morgan Stanley.
Shares in Shoprite, which have gained around 25 percent so far this year, were up 1.92 percent at 83.90 rand, outpacing a 1.5 percent drop in the Johannesburg Securities Exchange's blue-chip Top-40 index.
Shoprite said sales increased 13.6 percent to 67.4 billion rand ($9.13 billion), bolstered mainly by its South African unit, while sales from its African stores were hit by unfavourable currency swings.
The company raised its dividend by 13.1 percent to 147 cents per share.
Smaller rival Pick n Pay reported flat full-year profit and said it expected more difficulty ahead, underscoring the grim outlook for demand in Africa's biggest economy. (Editing by Simon Jessop and Will Waterman)