Italtile profit improves on fewer imports
Reducing imports and stocking up on locally produced goods saved Italtile from the weak rand made worse by subdued building activity during the six months to December.
© Alberto Giacomazzi – 123RF.com
The home-finishing goods retailer said trading profit over the period under review jumped 16% to R531m as its stores, mainly in coastal areas, gained competitive advantage over importers who had to contend with the deteriorating currency.
"We took over from the small independent importers around the coastal areas of KwaZulu-Natal, the Eastern Cape and the Western Cape as the weak rand really had an impact on them," Italtile chief financial officer Brandon Wood said on Thursday.
Italile manufactures 60% of its goods locally and the balance is imported.
Wood said the group was not completely unscathed by the weak rand, which depreciated about 27% against the dollar in the past 12 months. "There was margin pressure. The weak rand took off a couple of hundred basis points of our supply chain business, while the cost of brassware products rose 25%."
As a result, the group, whose retail outlets include CTM and TopT, increased prices on brassware products by an average of 4.7% in the past six months.
Compounding the pressure from the weak rand, Italtile had to contend with a building sector that contracted for most of last year as residential and commercial projects were few and far between in the wake of the fragile local economy.
The FNB-Bureau of Economic Research Building Confidence index ended the year at 48 points, below the 50 mark indicating growth.
Italtile rolled out seven new stores in the six months, bringing its total network to 133. Plans are in place to roll out another six in the 2016 financial year, with the Eastern Cape, Gauteng, Mpumalanga and KwaZulu-Natal targeted, Wood said.
Asked if the South African economy would be a bugbear for the group’s second-half performance, he said: "We are very cognisant of the economy, but our focus is squarely internal.
"We still believe there is a lot of opportunities to improve and we will be very disappointed if we can’t match this performance in the next six months."
Source: Business Day
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