Nompumelelo Magwaza
THE LACK of reticulation spend by Eskom and the scarcity of major infrastructure projects negatively affected ARB Holdings trade in the second half of 2014, the independent distributor of electrical and lighting products said yesterday.
The group saw its revenue decline by 5 percent to R1.1 billion in the six months to December. ARB’s share price fell as much as 6.25 percent yesterday before closing 5.94 percent lower at R6.02.
Headline earnings a share declined marginally by 0.4 percent to 24.79 cents from 24.88c in the previous year.
Operating profits were down by 3 percent to R98 million. However, the group’s operating margin improved to 8.9 percent from 8.7 percent previously.
ARB’s electrical division, which distributes cables and other electrical equipment to most of the industries, including mining and the government’s infrastructure developments, was most affected.
Revenue in the electrical division declined by 9.6 percent to R890.2m, with operating profits down 11.8 percent.
While Eskom was busy getting the country’s grid back to normal, some of its programmes had taken a back-seat.
ARB’s acting chief executive, Billy Neasham, said the past six months had been challenging to the whole operating environment, particularly in industries affected by Eskom and the National Union of Metalworkers of SA (Numsa) strike last year.
“Part of the business is orientated around KwaZulu-Natal, around the rural electrification, and Eskom has suspended a lot of those projects,” Neasham said.
He added that this had affected a lot of contractors who were ARB’s customers.
Neasham said the general lack of infrastructure spend negatively affected ARB.
During the Numsa strike last year, ARB could not trade with its customers nor some of its suppliers. Going forward, Neasham said ARB would focus on things that the company had control over.
“ARB cannot control infrastructure spend and there were opportunities out that the firm could pursue. We have to make sure that we control our operating costs because our costs are predominately fixed.”
However, he said the group was not looking at trimming staff. “We have never had any mass retrenchments and we are not planning to have any at the moment. There are areas that we have to look at in terms of rationalising, but there was no risk at this point in time in terms of retrenchments.”
The group employs about 800 people.
The group’s star performer was its lighting division, which trades under the Eurolux brands in leading retailers in the country. The lighting division saw its revenue increase by 23.1 percent to R213.5m and operating profit growing by 15.8 percent.
“This benefited from growth in customer base and the fact that the division has taken advantage of opportunities wherever it could. In the last couple of years, this business has grown by more than 20 percent.”
The group’s net capital expenditure for the period amounted to R10.7m, with R5.1m spent on the construction of ARB Electrical’s new Rustenburg premises completed in September.
The warehouse sells several products to the contractors in the area of Rustenburg.
Neasham said the calm in the mining industry was not “really” translating into their business because of power disruptions from Eskom.
“The load shedding at the moment is a cause for concern and was affecting all the industries, including mining, which will undoubtedly have an impact on our business.”