Protests, strikes and loan cutbacks weigh on Cashbuild sales growth

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Jaco Visser

Protests against the government, platinum sector strikes and the fallout from the unsecured lending boom would restrain sales growth, Cashbuild, the worst-performing JSE stock this month, has said.

“We will be more or less in the same scenario we have been at the half year in terms of revenue growth,” chief executive Werner de Jager said last week. “For the next six months we are not expecting fireworks.

“We’ve gone through a rough patch and we’ve taken some actions.”

Revenue at the country’s largest retailer of building materials rose 7 percent in the six months to December last year from a year earlier, but operating profit was down 3 percent to R190.9 million.

More than 70 000 workers have been on strike for the past 12 weeks at the biggest platinum mines in Rustenburg in the North West.

“We can see our stores in Rustenburg and in the platinum belt taking huge strain,” De Jager said.

And when an area was hit by service delivery protests, the company “needs to close its store for the day” to keep employees safe, he said.

Cashbuild shares have slid 11 percent this month, the biggest drop on the JSE’s 166-member all share index. They rose 75c to R120.59 on Thursday.

The shares are trading at 12 times past earnings, compared with the all share index’s 18. For the first time since April 11, the stock’s 14-day relative strength index advanced above the level of 30, which some analysts deem as oversold.

A slump in unsecured lending, which targets lower-income consumers, had caused Cashbuild’s customers to spend less, De Jager said.

Loans not backed by assets fell 26 percent in the final quarter of last year from a year earlier, according to the National Credit Regulator.

The company was taking action to restore profit, chief financial officer Etienne Prowse said last week.

This included a focus on products that were not selling well and taking corrective steps, such as pricing or changing the line-up by region. It also involved negotiating with suppliers to maintain margins while pushing stores to keep costs under control, he said.

“It is a tough consumer environment,” Warren Buys, an analyst at Cadiz Asset Management, said. “It looks like a tight consumer environment for the next year or two with food, fuel and administered prices increasing.”

Cashbuild also has outlets in Namibia, Lesotho, Botswana, Swaziland and Malawi. – Bloomberg


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