Hudaco profit increase

Industrial and security products importer and distributor Hudaco Industries (HDC) has reported a 17% rise in headline earnings per share to 441 cents for the six months ended May 2012.

Diluted HEPS rose to 434 cents from 371 cents previously.

The company declared an interim dividend of 155 cents per share - an increase of 19% over a year ago.

Sales were up 13% to R1.6 billion, while operating profit grew 21% to R181 million, with operating margin improving to 11.3% of sales.

The company said demand for its product offering was particularly strong in the closing months of the 2011 financial year, partly due to customers buying ahead of anticipated price increases following the sudden weakening of the Rand in September 2011.

In the event, price increases did not materialise as the Rand strengthened again in the beginning of 2012. Demand nevertheless remained reasonably strong until the end of March, after which there was a noticeable weakening.

“We attribute the weakening to lower demand from platinum mines following extended strike action and a general drop in confidence resulting from the ongoing crisis in Europe,” the company said.

The engineering consumables segment was the biggest profit contributor to the group. Hudaco's acquisition activity over the past few years has added significantly to this segment's sales base and all new businesses are performing in line with or ahead of expectations, it said.

Looking ahead, the group said a significant percentage of Hudaco's sales are derived from the South and southern African mining industry and the manufacturing and service sectors supporting that industry.

Constrained by insufficient infrastructure, particularly electricity and rail capacity, and policy uncertainty, mining investment in SA has stagnated over the past 10 years with some observers (including the DTI) arguing that the country is de-industrialising.

Mining investment in neighbouring countries is growing strongly however, albeit off a low base, and Hudaco will continue to look beyond SA's borders for organic sales growth.

“We anticipate that economic growth in South Africa will continue to remain weak over the next few years until new infrastructure comes on stream and a policy environment is created which encourages private sector investment. Although achieving meaningful earnings growth in such an environment is challenging, the group's acquisition programme will continue to supplement earnings. We expect further successes in the months ahead,” it said.

“The group's financial position is strong and we are confident about future earnings prospects,” it said. - I-Net Bridge