SEPHAKU Holdings (SepHold), the cementitious products producer and distributor, more than doubled headline earnings per share to 17.67 cents from 6.09c in the year to March 31 but the demand outlook for the new financial year has dimmed.
The group revenue, all from Métier's operations as the 100 percent subsidiary of SepHold, increased 23.9 percent to R786 million from R634m.
Group net profit after tax firmed to R45m from R20m.
Métier’s net profit after tax increased to R30m from R17m. At SepCem, net profit after tax increased strongly to R82m from R44m.
SepCem’s 36 percent equity – accounted profit to the group came to R29m (R16m). SepCem is a subsidiary of Dangote Cement.
Chief executive Neil Crafford-Lazarus said industry experts projected that demand for residential buildings would decline as interest rates were increased.
Owing to the cyclicality of the construction industry, the demand for building materials was expected to remain low or decline depending on the magnitude of economic contraction.
On mixed concrete demand, the government’s high debt levels appeared to have limited its ability to implement planned infrastructure projects.
In addition, the private infrastructure investors’ confidence in South Africa’s economic growth and business prospects had continued to ebb, he said.
The excess supply of non-residential properties and the reintroduction of load shedding since November 2021 had further entrenched apathy towards private construction projects, as reflected in the decline in non-residential building plans.
“These factors are expected to impact the mixed-concrete sector’s future performance negatively. The group will focus on cost management to sustain the gains from the numerous initiatives in the 2022 financial year. SepCem and Métier will continue to strengthen their balance sheets by reducing debt whilst seeking diversification opportunities in the construction value chain,” he said.
Métier and SepCem increased their net profit by double digits during the past year, with the year-on-year improvement in profitability mainly due to improved revenues and lower finance expenses.
“As we began the 2023 financial year, we recognised the headwinds against macro-economic growth and our industry. We remain vigilant in managing costs and agile in our sales approach to support profitability and maintain our market share,” he said.
Métier sales volumes increased by 18 percent year on year, albeit from the anomalously low comparative base due to pandemic-related restrictions in 2021.
“Management estimated the mixed-concrete sector demand to be slightly below pre-Covid-19 levels by year-end, emphasising the challenge of supplying ready-mixed concrete to a stagnant market,” he said.
Métier established its first plant at Bellville in the Western Cape and it started supplying customers in September 2021.
Demand in KwaZulu-Natal reverted to pre-Covid-19 levels during the year characterised by increased competition from independent ready-mix producers resulting in flat sales volumes.
The Gauteng-based operations experienced aggressive pricing from vertically integrated competitors as demand declined. The sales were 10 percent below volumes in 2021, mainly due to the continued low demand in the province.
Overall, integrated ready-mix producers continued to close plants in KZN and Gauteng, but were immediately replaced by highly competitive independent ready-mix producers with lower cost bases.
The cement industry’s application for a safeguard tariff against cement imports from the International Trade Administration Commission of South Africa had continued to stall.
SepCem’s Ebitda was 2 percent lower at R375.4m due to the insourcing of clinker in the first quarter of 2021 caused by a shortage at SepCem.
In January 2022, the SepHold Audit and Risk Committee successfully motivated for Crafford-Lazarus to continue the dual chief executive and finance director roles until December 31, 2022.
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