Sluggish economy hampers Italtile sales
DURBAN – JSE-listed Italtile expects its sales for the second half to remain under pressure as consumers continue to feel the impact of the country’s sluggish economy, impacted by high levels of unemployment and the deterioration in the retail and construction sectors.
Italtile has retail brands such as CTM, Italtile Retail, TopT and U-Light. It has a 95.47 percent stake in Ceramic Industries and a 71.54 percent stake in Ezee Tile Adhesive Manufacturers.
In a trading update released on Friday, the supplier of ceramic tiles reported a 1.4 percent increase in system-wide turnover to R5.4 billion for the six months to the end of December, with Eskom power interruptions adding to the company’s challenges during the period.
“Consumer confidence and investment sentiment remained subdued in the absence of transformational economic and socio-political reforms, continued policy uncertainty and an increasingly unstable power supply,” the group said.
The group said, as a result, household discretionary spend remained severely constrained in the context of escalating living costs, limited wage inflation, high levels of personal debt, retrenchments and unprecedented unemployment rates.
However, it reported a 4.5 percent increase in retail sales despite weak demand, with average selling price inflation estimated at 1.5 percent and like-for-like retail store turnover growing by 1.7 percent.
In the manufacturing division, the group said a generally softer consumer demand and the overstock position of tile wholesalers in the industry impacted negatively on Ceramic’s sales, which were flat compared to last year. “However, as remedial measures took effect, Ezee Tile succeeded in reversing the disappointing performance reported in the prior year. This business delivered good sales growth of 7.3 percent, which contributed to the manufacturing division’s total sales growth of 1.3 percent, with an estimated average selling price inflation in the manufacturing division of 1 percent,” the group said.
The group also incurred a once-off charge of R39 million related to a broad-based black economic empowerment (B-BBEE) transaction concluded with Yard Investment Holdings as announced in September.
The B-BBEE transaction is expected to impact the group’s earnings per share (Eps) and headline earnings per share (Heps) during the period, with both Eps and Heps not expected to increase by more than 2 percent.
Looking ahead the group said while the weak macro-economic conditions are extremely challenging and are expected to persist for the foreseeable future, management remains optimistic that the group will deliver growth for the full financial year.
Italtile expects to release its half-year results on Thursday.