JSE-listed electrical wholesaler ARB on Monday said it stood to benefit from South Africa’s electricity development ambitions, as it moved forward with strategic initiatives to help the group withstand the static macro environment.

CEO Byron Nichles commented that the company’s Electrical Wholesale unit could contribute to the implementation of government’s ten-year Transmission Development Plan (TDP), the country’s distribution infrastructure maintenance and upgrade requirements and State-owned power utility Eskom’s electrification programme.

ARB had, for the past six months, pursued a number of acquisitions and implemented several strategic initiatives, including securing exclusive international distribution agreements for several international electrical products.

These included the US-developed ACCC range of high-performance transmission conductors, as well as a range of bimetallic wire products from Copperweld and low-voltage products from China-based Zhejiang Chint Electrics.

Speaking at the group’s interim results presentation in Rosebank, on Monday, Nichles said these strategic developments had equipped the company with the required products to meet the needs of South Africa’s energy-development projects.

South Africa’s reserve margin for electricity was currently at about 3%, well below the accepted international benchmark of 15%.

Eskom expected to spend almost R150-billion on upgrading and expanding its current 28 500 km transmission network by 12 700 km by 2022, with a further R12.2-billion capital expenditure expected to be injected into refurbishment projects.

Last month, Eskom Transmission said a “substantial” portion of South Africa’s existing electricity transmission system was not currently compliant with the regulatory requirement that the system remain operable even when key equipment on the network fails.

The utility’s current investment programme was designed to ensure that 80% of the expanding network met that stipulation by 2017.

Meanwhile, various components of South Africa's current distribution network had an average age of 47 years – effectively three years away from its estimated 50-year life span – and a current distribution maintenance backlog of about R35-billion.

Experts had previously warned that the aging distribution grid would collapse within three years unless the maintenance backlog was dealt with.

Nichles commented that the country needed to double its current spend to R6.5-billion a year to maintain and refurbish the infrastructure.

A previous report by Research Channel Africa stated that the highly fragmented distribution structure was hampering the country’s ability to meet electrification targets and ensure a reliable supply of low-cost electricity to all customers.

The current R3.5-billion-a-year electrification programme was also expected to be a point of focus for ARB.

The company believes its acquisition of Eurolux, last year, enabled it to supply all the compact fluorescent lamps and light-emitting diode lighting required for Eskom’s 49M project, demand-side management initiatives and residential mass roll-out programmes to mitigate the country’s energy shortages.

ARB SOLUTIONS AND PRODUCTS
The ACCC proprietary product, pursued on the back of a request by Johannesburg’s City Power for a local supplier, could potentially be a game-changer, owing to its composite core, high-tensile strength and low thermal sag, Nichles said.

He noted that the ACCC product was believed to be able to reduce Eskom’s requirement for 420 000 t of new steel pylons – possibly allowing Eskom to cut out every third pylon – over the next ten years.

The transmission conductor allowed for 28% more aluminium at the same weight as the traditional steel core conductor, which, in turn, allowed for greater transmission.

Currently, more than 15 000 km of the product had been installed worldwide, with over 400 km installed in South Africa during a pilot project.

Meanwhile, ARB stated that the Copperweld products would enable greater security and tackle the issue of copper theft, given its antitheft properties. The bimetallic wire was harder to cut, held no scrap value and was pigmented to look like steel.

The anticorrosive, lower-cost product held 10% of the copper in traditional copper wires and allowed 63% of the conductivity at 60% of the weight of pure copper.

ARB was also expected to start distributing low-voltage products for China’s largest electrical products manufacturer Zhejiang Chint Electrics from May 1, under a five-year agreement with exclusive South African and preferential Southern African Development Community (SADC) region distribution rights.

Sales from the SADC region were expected to increase from the current revenue contribution of 8%, as ARB’s newly launched dedicated export division, which officially opened on February 1, focused on expanding the group’s footprint in the region.

The acquisition of cable distributor Industrial Cable Suppliers, which had branches in Rustenburg and Johannesburg, and Elektro Vroomen, which had branches in Kathu, in the Northern Cape, and Bloemfontein, enabled ARB to expand its national branch network to 19 branches across South Africa’s nine provinces.

The group entered two new market segments during the past six months, namely retail and transmission, through its acquisitions of lighting expert Eurolux and the distribution agreement with ACCC respectively.

FINANCIAL RESULTS
ARB reported that headline earnings a share for the first half of the 2013 financial year increased to R18.43, a 17% jump from the R15.69 recorded in the corresponding period the year before, while earnings a share increased to R19.35 in the interim period, from R15.70 in the six months to December 2011.

The group reported a rise in profit for the period to R58.5-million, up from R46.2-million earned in the first half of the previous financial year.

Eurolux and ICS had contributed to the 39% rise in revenue, from R693-million in the six-month period to December 2011, to R965-million during the period under review.