Mar 10, 2011
Dawn’s headline earnings fall as markets remain ‘cut-throat’Back
© Reuse this
“Although we anticipated that the decline would continue into the first half of this reporting period, we didn’t realise just how tough it would be,” he said, announcing a 52% decline in headline earnings a share.
Dawn posted headline earnings of 15,2c a share, compared with 31,9c a share in the first half of the 2010 financial year. Headline earnings a share were 11% lower than the 17c a share achieved in the previous half-year, indicating a slowing in the rate of the decline.
“To paint a picture of just how difficult it is out there, volumes and prices in the majority of our businesses have declined sharply for four successive reporting periods now,” Tod stated.
Operating profit declined by 48% to R63-million from the corresponding period’s R121-million.
“Reduced volumes and the delay in corrective market strategy resulted in substantially lower margins at 3,4% against 6,5% achieved a year ago, and significant losses. Although we achieved market gains, its effect was diluted by the volume declines,” he noted.
Dawn’s revenue decreased marginally from R1,87-billion in the first half of 2010 to R1,84-billion in the current reporting period.
The company owns brands such as Cobra taps and Vaal Sanitaryware, as well as pipe manufacturer DPI Plastics.
Dawn’s building division contributed 58% of group revenue, while its infrastructure division contributed the balance.
The building division completed 21% fewer buildings in the six months and recorded a 1% decline in revenue.
Tod noted that competition was “cut-throat” and added that margins were under severe pressure.
“In these tough times, sale at a lower margin is better than no sale at all. We are now in competition for a piece of a smaller pie,” he said.
COO Collin Bishop added that the strong rand also negatively impacted on exports and increased import competition.
“Further, salary increases were delayed in the first half of the 2010 financial year, which made it necessary in the first half of 2011,” he noted.
Meanwhile, the infrastructure division saw disappointing results with industry awards down 40%. The division reported a 3% decline in revenue, while volumes fell by 7%.
Another reason for the decline was a concealed accounting error, which had a R6-million negative impact on the volumes and profit of the business.
However, the company still grew its market share and reduced costs.
Dawn aimed to improve its profitability with further cost reductions of about R11-million for the second half of the 2011 financial year.
Tod pointed out that working capital was unlikely to improve until market volumes increase.
“We are moving our focus from cost-cutting, efficiency evaluations and right-sizing to growing our market share. Even a small improvement in volumes will have a positive impact on the bottom line,” he said.
Edited by: Mariaan Webb© Reuse this Comment Guidelines (150 word limit)
International consulting engineering company Royal HaskoningDHV (RHDHV) has appointed Salani Sithole as South African MD, effective March 1. Sithole has been with the company for six years and, prior to joining RHDHV, held various positions in engineering consulting,...
Recent Research Reports
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
This Week's Magazine
National flag carrier South African Airways (SAA) is in an advanced stage of renegotiating its deal with European airliner manufacturer Airbus to acquire A320 single-aisle (or narrow body) aircraft. The aim is to replace ten of the aircraft still on order with five...
Worldwide, the main thrust in the ports industry over the past decade or more has been to increase efficiency. Traditionally, ports have been run by engineers and mariners and, in the past, increasing a port’s capacity was achieved by expanding the harbour. “That has...
What do you do when an elephant has a toothache? You call Dr Gerhard Steenkamp from the University of Pretoria’s (UP’s) faculty of veterinary science, Onderstepoort, one of only two elephant ‘dentists’ in the world.
The 2015 Sanlam/Business Partners Entrepreneur of the Year (EOY) competition was launched earlier this month in Johannesburg, with the main focus on creating and inspiring entrepreneurs to create jobs and boost the economy.
In a recent letter to the editor that I sent to Engineering News (Concerns regarding South African portion of Square Kilometre Array) and in a follow-up article elaborating further (We must start preparations to build our own synchrotron light source), I stated my...