A “stellar” performance by cementation newcomer Sephaku Holdings’ Métier Mixed Concrete division has swung the group to a full-year net profit of R47.16-million for the 12 months ended March 31, positioning it to expand its market share in what has become a highly competitive domestic cementation market.

The group achieved full-year revenue of R775.4-million and earnings before interest, taxes, depreciation and amortisation of R128.9-million for the year, driven chiefly by a strong order book for Métier that would “keep the business busy” for the next 18 months.

Sephaku posted basic earnings a share of 24.43c apiece for the 12 months, while headline earnings a share increased by 26.79c year-on-year to 24.43c.

Sephaku’s cement production business, SepCem, business, meanwhile, progressed from development stage into a fully operational producer over the period, achieving revenue of R919-million by the end of December, largely from the Delmas milling plant, which reached steady-state production in November.

Clinker and cement production from the business’s Aganang integrated plant, in Limpopo, started in August, improving cost efficiencies and enabling SepCem to remain “highly competitive”, Sephaku CEO Dr Lelau Mohuba told investors on Friday.

“SepCem’s market penetration success has continued into their new financial year as reflected by the increased quarterly sales for the period of some R521-million – a 29% increase from R405-million in the fourth quarter of the 2014 fiscal year.

“Our main focus going forward is to sweat the assets and increase free cash flows in preparation for the distribution of dividends to our shareholders,” he said during a presentation of the group’s results at the JSE, in Johannesburg.

OPERATIONAL REVIEW
Mohuba added that Métier increased its delivery fleet by 23% and pumping capacity by 20% compared with the previous financial period to cater for the additional demand for its product.

This despite the operating environment remaining “highly competitive”, as overall demand remained flat and the number of producers increased owing to the low barriers to entry inherent in the industry.

“The subdued demand from the construction industry also resulted in prices remaining flat on a year-on-year basis. This meant that Métier had to prioritise cost management and the production of high-value specialised concretes to maintain margins,” he commented.

According to Mohuba, Métier remained profitable and well positioned to retain and or grow its market share in the regions it operates in.

“The subsidiary continues to explore viable expansion opportunities in all markets to enable it to grow market share and earnings. The short-term strategy is to ensure that the existing operations continue to generate positive earnings, reduce gearing and increase operating cash flows,” he said.

Mohuba, meanwhile, described a highlight of SepCem’s financial year as the acceptance of its brands by the market, as demonstrated by the 58% growth in sales volumes in the second half of the year.

Although retail sales volumes of its products had been “satisfactory”, the bulk sales had been lower than expected owing to the longer product adoption period required by this segment of the market.

“Prior to the internally-produced clinker, SepCem was manufacturing cement from the Delmas plant using outsourced clinker. The introduction of the internally produced clinker significantly improved cost efficiencies. The modern manufacturing technology at both plants with state-of-the-art components further improved operational efficiencies,” he noted.