Decorative coating specialist Freeworld Coatings was optimistic that it would continue to perform competitively in the 2010 financial year, despite the continued expected challenging conditions.

The group’s net profit fell 32% to R147-million in the year ended September 30, 2009, compared with R216,9-million the year before, mainly as a result of a R42-million pretax mark-to-market fair value adjustment on financial instruments and a R14-million shortfall in profits from associates.

Freeworld Coatings’ policy of taking forward cover for imported raw materials and capital expenditure items, had resulted in a mark-to-market fair value loss on financial instruments of R26,2-million, compared with a profit of R15,4-million the year before, owing to the strength of the rand.

Income from associates had declined substantially to R8,6-million, compared with R22,4-million the year before, with DuPont Freeworld being severely impacted on by motor manufacturers cutting back production.

Its earnings a share for the year dropped 33% to 70c a share, compared with 105c a share in 2008.

However, its revenues remained flat at a record R2,7-billion.

“In continuing tough recessionary economic conditions, Freeworld Coatings produced a solid set of results for the year. We continue to invest in the business with over R100-million in capital investment over the past year and the recent launch of three new exciting product ranges. We also remain focused on achieving greater efficiencies across the business,” CEO Andre Lamprecht said in a statement.

Meanwhile, the group noted that its decorative coatings division had had a challenging year, with adverse movements in the oil price, exchange rates and commodity prices, which were not recoverable in the marketplace.

Further, the businesses within its performance coatings division had also been impacted on by the global and domestic economic slowdown.

Despite this, turnover had increased by 1%.

However, earnings, excluding special items and fair value adjustments, had declined by 13%, owing to margin pressure, the group noted.

While there were signs of a recovery in the global economy, the group would remain cautious and would continue to focus on limiting input costs and improving its productivity levels.