WG Wearne losses continue

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Suppliers of materials to the building and construction industry‚ WG Wearne (WEA)‚ on Friday reported a diluted headline loss per share of 19.88 cents for the year ended February 2012‚ after a loss of 21.12 cents per share a year ago. No dividend was declared.

The company reported revenue declined 17% to R305.9 million‚ however‚ the loss for the period narrowed to R54.9 million from a loss of R148.6 million previously.

The largest contributor to the decrease in turnover was the ready mixed concrete division where external turnover dropped by 34%. This was the consequence of the closure of non performing operations in conjunction with continued weaknesses in the residential market. The concrete products division continued its pleasing growth trend yielding a 20% increase in turnover‚ it noted.

In accordance with the turnaround strategy‚ all loss-making operations

were evaluated for economic viability and possible closure. Consequently‚ four ready mixed concrete plants‚ a crushing operation and a sand washing operation were closed during the year.

These closures together with a greater focus on higher margin contracts allowed the group to increase its gross profit margin before depreciation charges by 12% to 32% (compared with 2011’s 20%).

The disposal of the unproductive assets during the year resulted in proceeds of R12.6 million.

Looking ahead‚ it said although the current year headline loss of R47.8 million did not reflect a turnaround‚ a majority of the turnaround initiatives had been completed or were nearing completion. This had resulted in nearly all of the loss making operations either having been disposed of or closed down.

WG Wearne is investigating the outsourcing of non-core activities. These initiatives will aid in the reduction of borrowings‚ reduce fixed operating costs and allow it to more rapidly react to changes in its operating environment.

In addition it is exploring avenues which would see it expand its

drilling and blasting operation within the aggregate division. Although this

would require further investment in plant and equipment‚ this investment would see the expansion of one of the group’s best performing operations.

Moreover‚ general market conditions began to improve towards the end of the financial year‚ indicated by cement sales increasing for the first time in three years. Current data is no longer available but general market consensus seems to indicate that the year-on-year monthly increase in volumes is between 5% and 8%‚ the company said. This‚ together with an improvement in the civil engineering industry should see the group's fortunes improve significantly‚ it said.

By 15:00 on the JSE‚ the company’s share price was up 4 cents‚ or 40% to 14 cents. - I-Net Bridge


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