JSE-listed engineering firm ELB Group has swung into a loss for the six months to December after experiencing difficult trading conditions exacerbated by weak commodity demand and a declining rand.
The group posted a headline loss of 51.3c a share during the first half of the year, a 138% fall from the headline earnings a share of 136.8c in the previous corresponding period.
The basic earnings a share of 137.4c in the prior period also fell into the red during the period under review, with a basic loss of 50.6c a share.
ELB reflected a loss of R23-million in the six months to December, falling some 148% from the R48-million profit achieved in the first half of 2014.
Sales for the period declined by 20% to R1-billion, mostly as a result of difficult trading conditions and lower activity levels across all of the group's operations.
“The combination of subdued commodity prices, a global economic slowdown, the deterioration of the rand, protracted labour strikes, high unemployment rates, a downturn in investor confidence and a low growth rate in South Africa has put the sectors the group operates in under severe pressure,” noted the company.
ELB’s Equipment Africa business posted lower sales – down 8% to R376-million – for the period under review, with profit before tax decreasing from
R39-million in 2014 to a loss before tax of R13-million for the period.
Sales for the period from the firm’s Engineering Services Africa division fell by 29% to R532-million in the first half of 2015. The unit recorded a loss before tax of R1-million, plunging 103% compared with the corresponding period last year.
In Australasia, sales decreased 10% to R134-million in 2015, with a narrowing in the region’s loss from R7-million to R6-million before tax.
Nevertheless, ELB posted strong operating cash generation, which surged by 149% to R13-million, with its net asset value up 5% a share year-on-year to R29.23.
Net cash and cash equivalents decreased by 8% from R363-million as at December 31, 2014, to R335-million, as at December 31, 2015.
“The group has embarked on a number of initiatives over the past two years to position itself to achieve sustainable growth, for which returns are typically only realised over the next few years.”
In line with this, ELB expected “another difficult year” ahead for the South African economy and, with continuing pressure on global commodity prices, deterioration of the rand and the delay or cancellation of capital expenditure and projects, pressure on cash flow was expected.
“Further, we expect a migration from large infrastructure projects to refurbishment and maintenance projects,” added the company.
However, despite the bleak outlook, ELB was confident that its strategy and targeted opportunities would “position the company favourably” for the next 24 to 36 months.
ELB maintained an interim cash dividend of 30c a share for the six months under review.