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
Updated 2 hours 33 minutes ago As industry prepares for the launch of South Africa’s digital terrestrial migration, the South African Communications Forum (SACF) hosted a workshop to determine the country’s readiness in terms of compliance of set-top boxes [STBs] and access to funding. The...
Updated 2 hours 50 minutes ago Higher Education and Training Minister Blade Nzimande has outlined plans for the development of a new health and allied sciences university into which the Medical University of Southern Africa (Medunsa) campus of the University of Limpopo, located in Ga-Rankuwa, will...
Updated 2 hours 59 minutes ago The costs of communicating have to drop, Communications Minister Yunus Carrim said on Wednesday. "Clearly, the costs have to come down. It's not just in the interests of the poor and disadvantaged but the economy as a whole," Carrim said in a statement following a...
Recent Research Reports
Steel 2014: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2014 report provides an overview of the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon steel and stainless...
Projects in Progress 2014 - First Edition (PDF Report)
This publication contains insight into progress at the delayed Medupi and Kusile coal-fired projects, in Mpumalanga and Limpopo respectively, as well as at the Ingula pumped-storage scheme, which is under construction on the border between the Free State and...
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...
This Week's Magazine
The Electronic Systems Laboratory (ESL) of the Department of Electrical and Electronic Engineering at Stellenbosch University is strongly reaffirming its position as one of South Africa’s leading centres for satellite technology and expertise. It is currently...
The world’s lowest-cost diesel-electric locomotive is not made in China, but in Pretoria, at RRL Grindrod Locomotives’ newly upgraded 30 000 m2 plant. The company’s locomotive pricing is “more competitive than any other original-equipment manufacturer (OEM)...
The South African Defence Review 2012, released to the public at the end of last month (despite the year given in its title) recommends the creation of the post of Chief Defence Scientist. This official would be responsible for the management of defence technology...
AltX-listed engineering technology company Ansys has been awarded an R188-million contract by Transnet to supply integrated dashboard display systems to the freight rail utility’s locomotives. Black-owned and controlled Ansys developed the bespoke integrated system...
South Africa’s sole nuclear power station Koeberg, which is located in the Western Cape, breached a major operations milestone on April 4, which marked the thirtieth anniversary of Unit 1 having been connected to the grid. Eskom, which operates the two-unit plant,...