New entrants in the cement industry could change the operating environment for ready-mixed concrete products, WG Wearne, the financially troubled AltX-listed ready-mixed concrete and aggregates supplier, has warned.
The domestic cement industry is facing increased competition because Sephaku Cement this year became the first new entrant into this market since 1934; Jidong Development Group of China-backed Mamba Cement has commenced construction on a new cement plant in the country; and listed PPC, which has embarked on an African expansion strategy because of increased competition in the South Africa cement market, will over the next 18 months increase its cement capacity by a further 1 million tons a year through an upgrade to its kiln 8 in Slurry.
WG Wearne achieved a turnaround to a profit in the year to February, reporting a total comprehensive profit of R13.4 million compared with a loss of R17.4m in the previous year on the back of improved performances by both its ready-mixed concrete and aggregates divisions.
Group revenue increased by 16 percent to R463m from R400m. The ready-mixed concrete division increased its turnover by 20 percent to R231m and was the largest contributor to the increased group turnover.
The aggregates division remained a consistent contributor to the group’s turnover by posting 10 percent growth in turnover to R283m.
Operating profit rose by 97 percent to R14.1m. The group’s headline loss a share narrowed to 6.07c from 6.15c. A dividend was not declared. Cash generated from operating activities more than tripled to R21.76m from R6.66m.
SJ Wearne, the group’s chief executive, said the group’s strategy of focusing on key operational areas and the monitoring of individual business units continued to drive the business’s turnaround initiatives.
He said this constant monitoring had seen improvements in almost all of the individual operating units despite high competition, adverse weather conditions and lower-than-anticipated government expenditure on infrastructure.
Wearne said the ready-mixed concrete division had continued to improve and, given market conditions, had performed admirably and was showing pleasing growth, but the industry remained competitive and margins had to be carefully monitored.
“An intensive sales drive is to be implemented to gain market share, increase volumes sold and improve on gross profit margins. New entrants in the cement industry could also change the operating environment in this business,” he said.
The concrete manufactured products division benefited from the additional capital expansion resulting in new product lines and turnover increasing by 44 percent to R15.3m.
“A greater demand for concrete pipes and culverts is occurring as increased road building projects materialise,” Wearne said
The share price dropped 23.08 percent to close at 10c on AltX yesterday.