Hudaco CEO Graham Dunford
Photo by: Duane Daws
Despite tough economic conditions, industrial products distributor Hudaco recorded a 20% year-on-year increase in headline earnings a share to 548c apiece for the six months ended May 31.
Earnings a share increased by 32% year-on-year to 548c, while its operating profit was up 46% year-on-year to R292-million.
The company attributed its growth to its strong acquisition strategy, which reduced its dependence on the local mining and manufacturing sectors. The group noted that this also increased its exposure to other sectors, which “is paying off”.
“It looks like it is easy sailing out there, but it is not,” CEO Graham Dunford said at a presentation of the company’s results on Friday, noting that the company’s manufacturing and mining customers were hardest hit by South Africa’s weakening economy.
He added that ongoing power outages, low commodity prices, rand volatility and inflexible labour markets were leading to depressed business confidence.
Dunford said it “was unsurprising” that Hudaco’s engineering consumables segment struggled and reported that this segment’s turnover had decreased by 2% to R1.26-billion in the first half of the current financial year.
“The mining dependent business felt it worst. The mining and manufacturing segments now only account for 30% of our business. That’s a huge change, thinking about Hudaco’s early days, where [we] only [supplied to] these sectors.”
THE GOOD NEWS
However, despite the economic challenges, consumer spending was holding up “reasonably well”, which saw Hudaco’s consumer-related segment performing well.
This segment, comprising automotive aftermarket products, power tools, batteries, security equipment and professional communication equipment, saw a 57% increase in turnover, to R1.28-billion, while its operating margin increased by 15.1% year-on-year.
Dunford pointed out that the alternative power sector did "exceptionally well for us in this trying time.”
He added that Eskom’s ongoing electricity supply issues would likely result in more successes for Hudaco in this regard in future.
While Hudaco expected a tough year ahead, it believed that the engineering consumables segment would have a stronger second half. It was also expecting steady growth in exports and noted that its books would also be bolstered by the acquisition of Partquip, which would add to earnings growth in the second half.