Italtile manufacturing division counts festive season losses on Eskom power cuts
Companies / 14 February 2020, 11:00am / Sandile Mchunu
JOHANNESBURG - Italtile felt the impact of Eskom’s load shedding during the festive season as the power cuts disrupted business and dented profits in the six months to the end of December.
Italtile’s chief executive, Jan Potgieter, said yesterday that the group’s manufacturing division was hit hard when Eskom implemented Stage 6 load shedding.
“The two days in December where we went up to Stage 6 were the most severe for the business, affecting its sales.
“In those two days, only the direct cost to the company was about R4.5m. It also meant that we had to spend on diesel as well as on unplanned maintenance,” Potgieter said.
The manufacturing division’s total sales, consisting of Ceramic Industries and Ezee Tile, increased by 1.3percent, with an estimated average selling price inflation of 1percent in the division.
Italtile, the manufacturer, franchisor and retailer of tiles, bathroom ware and related home-finishing products, was also confronted by low economic growth and subdued consumer spending during the period.
The group’s system-wide turnover increased by only 1.4percent to R5.4billion, up from R5.3bn compared with last year.
Its adjusted basic earnings per share improved by 5.5percent to 58.4cents a share, while adjusted headline earnings per share increased by 6.8percent to 58.4c, excluding the impact of a once-off black economic empowerment charge of R39m on earnings.
The group declared an interim dividend of 23c a share.
Potgieter said that despite the testing operating climate, the group reported solid results for the period under review, reflecting the strength of its strategically structured resilient business model.
“In light of unfavourable trading conditions and weak consumer demand, management’s key focus areas were to compete vigorously to win market share, increase productivity and extract efficiencies, entrench a performance-driven culture and continue to invest across the business.” Potgieter said.
Italtile spent R340m as capital expenditure during the period, up from R306m, primarily on investments across the group’s retail properties and manufacturing plants.
“We saw opportunities in the bathroom ware division, and we are planning to allocate more capital expenditure to gain market share.
“We want to be a complete solutions business by investing more on our bathroom ware division,” he said.
Looking ahead, Potgieter said although the prevailing weak macroeconomic conditions were extremely challenging and were expected to persist for the foreseeable future, they remained optimistic that the group would deliver growth for the full financial year.
“The group’s key goals will be to continue to compete aggressively to gain market share through better execution of retail excellence disciplines, improve management of stock holding and working capital, optimise operational efficiencies and productivity across the business and leverage integration between the stores and supply chain,” he said.
Italtile’s shares rose 2.12percent to close at R13 on the JSE yesterday.