While JSE-listed electronic equipment supplier South Ocean expects continued revenue growth into the second half of the year, margins will remain under pressure.
The group reported on Monday that prospects for the South African economy's growth rate for the next year were lacklustre, owing to a decline in mining, agriculture and manufacturing activities, an abnormally volatile exchange rate and limited infrastructure spending.
In the six months ended June 30, South Ocean’s gross profit decreased by 17.5% to R86.6-million, while operating profit decreased by 102.7% to a loss of R0.6-million for the half-year.
However, the group noted in a trading statement that profit before tax decreased by 188.2%, compared with the prior period, to a loss of R9.9-million.
Still, basic earnings a share decreased by 182.4% to a loss of 4.2c, with headline earnings a share decreasing by 189.6% to a loss of 4.3c, compared with the prior period.
Headline loss for the period amounted to R6.7-million.
Group revenue for the half-year increased by 4.9% to R901.6-million.
SOUTH OCEAN ELECTRIC WIRE
The revenue of the group’s electric cable manufacturer, South Ocean Electric Wire, increased by 4.9% to R743.9-million, which the group attributed to an increase in production levels.
South Ocean stated that market conditions were weak during the first six months of the year and margins were under pressure owing to the competitive market.
RADIANT
South Ocean’s lighting and electrical accessories division, Radiant, reported R163.6-million in revenue – an increase of 5.5% compared with the same period in the prior year.
The supplier noted that the first half of 2016 continued to see significant growth in light-emitting-diode products, as well as an overall increase in revenues, however, the company attributed the volume increase to products yielding lower margins.
South Ocean added that margins are under pressure owing to lower-quality products. Further, there is subdued appetite for high-end products, as consumers have lower disposable income and are extremely cost conscience.