Sephaku Holdings’ (Sephold) headline earnings a share softened markedly to 7.54 cents in the six months to September 30 from 11.26c in the prior period even though revenue from cement sales was well up.
Sephold, which owns Métier Mixed Concrete and which holds an investment in SepCem with Dangote Cement, saw revenue increase 19.7% to R626.6 million. Net profit after tax, however, fell to R19.7m from R26.7m in the first half of the 2023 financial year.
CEO Kenneth Capes said the operating environment was subdued in the six months. Building construction works improved slightly during the first quarter of calendar 2023, but dipped in the second quarter.
“Activity on civil construction projects and non-residential buildings increased. The rising cost of essential goods and services, coupled with higher interest rates, continued to erode the disposable income of consumers, maintaining pressure on the retail market,” Capes said in a statement.
He said Métier and SepCem remained resilient in the challenging markets.
Métier’s taxed profit increased to R37.8m from R29.5m and the earnings before interest and tax (Ebit) margin was static at 8.4%.
At SepCem, sales revenue was R1.24 billion (R1.16bn). But the Ebit margin fell to 1.1% from 5.3%. The SepCem 36% equity accounted loss came to R14m compared with R3.8m profit at the same time a year ago.
No dividends were declared. The share price was unchanged at 100c yesterday afternoon on the JSE.
SepCem has a December year-end as a subsidiary of Dangote Cement. Therefore, the figures refer to the six months ended June 30, 2023.
Capes said despite the challenges of escalating diesel costs, the water crisis in Gauteng and congestion on the N3/N2 highway in KwaZulu-Natal, SepHold's ready-mix business, Métier, delivered a strong set of results.
Métier capitalised on opportunities in the industrial and infrastructure development sectors, managed costs consistently and enhanced profit margins with customer-centric products and solutions, he said.
The combination of excess capacity, lower demand for bagged cement from retail customers and above-inflation fuel and electricity costs eroded SepCem’s profit margins, resulting in a R38.9m net loss after tax.
“While SepCem continues to apply austerity measures, to be sustainable the business will have to recover input cost increases in a competitive market, through price growth measures,” said Capes.
He said, however, that Métier and SepCem had remained resilient in challenging market conditions. Both businesses would continue to focus on cost efficiencies and innovative sales strategies.
“The strengthening of their balance sheets in the 2023 financial year positioned the businesses to capitalise on growth opportunities as they arose,” the directors said.
BUSINESS REPORT