Reunert focuses on cash preservation as slowdown bites
© Reuse this
JSE-listed technology group Reunert would focus on cash preservation as economic conditions deteriorated, but CEO Gerrit 'Boel' Pretorius was convinced that some of its business units were still positioned for growth.
Speaking at the company's year-end results presentation in Johannesburg on Tuesday, Pretorius acknowledged that demand would decline in the near term and that exchange-rate uncertainty would linger.
The group was responding by scaling back capital expenditure and raising its dividend cover from 1,8 to two times - this cover could be revised upwards again should conditions deteriorate further.
Pretorius said that it was "good management" to preserve cash, as trading conditions become more difficult.
However, he said the company would still consider acquisition opportunities given its strong balance-sheet position. But there was no immediate prospect of corporate activity.
The group's CBI-Electrical division was expected to benefit from strong demand for high-tension cable and fibre cable, although demand from the general market would be weaker owing to the economic climate.
The energy cables business had in the year ended September 30, 2008, secured a significant contract to supply aluminium conductor steel reinforced cable for Eskom's five-year contract. It also had a strong order book for the supply of high-voltage cable.
Further, Pretorius noted that while the high copper price had previously been of great concern for the energy cables business, the price had since softened from about $8 800/t to about $3 000/t. He expected the price to decline even further to about $2 200/t.
Demand for its telecommunications cables from Telkom had declined, but fibre-optic cable demand was increasing.
Pretorius expected this demand to increase even further with a number of telecommunications players, such as Altech Autopage Cellular, were now permitted to self-provide.
On the low-voltage products side, Reunert had grown its exports of circuit-breaker equipment and had countered Chinese imports in the local market. Its exports to Australia had also increased.
The company also planned to start manufacturing a number of medium-voltage products and was already supplying some products to this market, where substantial contracts were on offer.
Meanwhile, Pretorius asserted that the group's Reutech division would benefit from receiving a dollar-based income in the short term, while local demand would ensure demand for its products in the longer term.
The radar systems business had already seen an adoption of its slope stability radar equipment by a number of the large mining houses, where there was a big requirement. It had already started exporting systems to Australia and South America, and was optimistic of entry into the North American market.
Further, the company had facilities in place to ensure it could produce about 500 000 set-top boxes a year, as part of government's digital migration programme.
Pretorius said this market was valued about R7-billion over a four to five year period.
Meanwhile, the RDL Solutions business had received its first terrestrial trunked radio (Tetra) order from a large industrial South African group, in a contract worth R52-million.
It would provide 4 000 tetra-safe handsets and install 11 tetra sites, including towers and civil works.
Further, the company had submitted two large tenders, which Pretorius hoped would come through, as larger Tetra contracts could generate about R1-billion each.
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,...
The Gauteng Provincial Government has outlined plans to develop a handful of “mega” human settlements as part of an ambitious long-term housing development strategy aimed at narrowing the housing backlog, with plans afoot to replace informal settlements with...
While State-owned power utility Eskom was unable to cut off electricity supply to some of its neighbouring trade partners, it was able to reduce energy exports by 10% when load shedding was implemented locally. The Department of Public Enterprise explained that Eskom...
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...