Mar 10, 2011
Dawn’s headline earnings fall as markets remain ‘cut-throat’Back
DPI Plastics|Infrastructure Sector Supplier|Pipe Manufacturer|Collin Bishop|Derek Tod
© 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
Recent Research Reports
Automotive 2014: A review of South Africa's automotive sector (PDF Report)
The report provides insight into the business environment, the key participants in the sector, local construction demand, geographic diversification, competition within the sector, corporate activity, skills, safety, environmental considerations and the challenges...
Construction 2014: A review of South Africa's construction sector (PDF Report)
Construction data released during 2013 hints at a halt to the decline in the industry during the last few years, with some commentators averring that the industry could be poised for recovery. However, others have urged caution, noting that the prospects for a...
Electricity 2014: A Review of South Africa's Electricity Sector (PDF Report)
This report provides an overview of the state of electricity generation and transmission in South Africa and examines electricity planning, investment in generation capacity, electricity tariffs, the role of independent power producers and demand-focused initiatives,...
Defence 2013: A review of South Africa's defence industry (PDF Report)
Creamer Media’s 2013 Defence Report examines South Africa’s defence industry, with particular focus on the key players in the sector, the innovations that have come out of the defence sector, local and export demand, South Africa’s controversial...
Road and Rail 2013: A review of South Africa's road and rail infrastructure (PDF Report)
Creamer Media’s Road and Rail 2013 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...
Liquid Fuels 2013 (PDF Report)
Creamer Media’s 2013 Liquid Fuels report examines South Africa’s liquid fuels market, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing,...
This Week's Magazine
A structured approach, wherein managers personally engage at each level of the project, is necessary to mitigate delays to the workflow on mega construction projects, says State-owned Eskom Kusile power station projects GM Abram Masango. The 4 800 MW Kusile power...
Construction of transmission lines to evacuate power from a regional hydroelectric project in East Africa, which was hanging on the balance following the withdrawal of financing by key partners, is now back on track. After six months of uncertainty, the African...
Three Memorandums of Understanding (MoUs) were signed between South African and Malaysian companies at the Malaysian High Commission in Pretoria on Friday. These MoUs are part of the indirect offsets programme South Africa is providing in return for Malaysia’s...
The South African new vehicle market may well dip to 640 000 units in 2014, says Toyota South Africa Motors (TSAM) sales and marketing senior VP Calvyn Hamman. This is the first prediction that anticipates a drop in the market. To date economists and industry bodies...
Nissan will re-enter the South African minibus taxi industry in March, when the new NV350 Impendulo goes on sale. The 16-seater has been specifically tailored to meet the terms of government’s Taxi Recapitalisation Programme, which aims to replace South Africa’s...