Tile company profit up but slowdown likely

Listed tile company Italtile, which says it has 45% of the local DIY tiling market, reported a 12% increase in first-half trading profits yesterday, but warned of a slowdown coming in the market.

The company, which owns retail consumer outlets CTM and Italtile, said its turnover had increased 7% to R1,4bn in the six months ended December 31.

Trading profit was up from R185m in the same period in the previous year to R208m.

The company referred to the results as “acceptable” saying that “an industry-wide downturn in demand during the traditionally heightened months of November and December last year dampened the group's performance.”

CEO Gian-Paulo Ravazotti said this trend was likely to continue, blaming the poorer performance in the latter months on high interest rates.

He said stores in exclusively black areas showed good sales volume growth, while the premium end of the market remained strong.

However, middle-income earners in traditional stores had “come under some pressure”.

Ravazotti said that the effect of the nationwide power cuts was not reflected in the latest reporting period.

While the group's stores would not be affected by the cuts, the inconvenience caused would make it more difficult for customers to get to the stores, which could result in lower sales volumes.

Uncertainty in the local market had prompted the company to increase its dividend cover to four times, while the board has declared a dividend of 4c a share, down from 5,2c in the comparable period in 2006.

The group's eight stores in Australia continued to generate higher margins relative to the volumes sold in SA, but competition was strong in the Australian market, Ravazotti said, adding that the group would be opening a ninth store in Australia shortly.

The operations in African countries outside SA continued to trade, but at a “marginal level” because of regional unrest.

A 44-for-1 share split was completed in October last year and Ravazotti said this had assisted in improving the group's share liquidity.

Source: Business Day

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