Paint manufacturer ChemSpec on Thursday reported weakened results for the year ended March 31, posting a loss for the period of R31-million – a 121% widening of the 2012 loss of R14-million.

As a result, its basic loss a share increased by 35%, from a loss of 2.13c in 2012, to a loss of 2.89c for the 2013 financial year.

While revenue increased by 24% to R471-million, margins fell as a result of increased cost-push inflation, observed primarily in the second half of the year.

Owing to the weakening of the rand, there was an increase in the price of crude oil and product mix “issues” in the industrial and decorative paint businesses were experienced.

The company said these market factors were further exacerbated by a 35% increase in operating expenses, which exceeded revenue growth and amounted to R237-million for the twelve months.

Higher operating costs were driven by a 29% payroll increase, owing to a renewed executive management team, a 39% rise in operating leases as a result of a one-off add back in the prior year and higher logistics costs.

On the back of a worsened loss-making position, ChemSpec CEO Baron Schreuder assured shareholders at the company’s results presentation, on Thursday, that the manufacturer was at the cusp of repairing its financial standing.

“While this is undoubtedly disappointing for shareholders, I must stress that the business is still in a turnaround phase, where unforeseen market conditions will inevitably affect short-term performance. On the other hand, there are several positive opportunities for the business, which will ensure improved trading and financial results and assure future sustainability,” he said.

ChemSpec chairperson Ivan Clark – whose family currently owned about 17% of the business – added that, while the company was “a few months off completion of the turnaround”, shareholders should view the year’s loss as a base-setter for an improved future showing.

“While we should not expect an immediate return to profits, we can expect a near-term full recovery, which will happen,” he said.

This, Clark stressed, would be achieved through a strategy to accelerate sales volumes and establish supply and product partnerships, as well as take advantage of new markets, new products and new territory opportunities.

The company said it would focus chiefly on expanding its product offering in the decorative paint market, in which it currently only held only 1% of a R4.64-billion market.

In addition, ChemSpec had defined and selected competitive product channels to achieve this, as the company believed that an opportunistic response to the market would not enable it to achieve long-term sustainability.

Strategic partnerships already established included a long-term manufacturing contract with paint retailer Jack’s Paint to develop its private label paint brands and to provide retail access to ChemSpec products.

Earlier this year, ChemSpec acquired a decorative manufacturing facility from Kansai Plascon to ensure an uninterrupted supply of products to Jack’s Paint.

The company had also increased its product offering to hardware retailer Mica Group and had “strengthened” its relationship with Dutch automotive paint supplier AkzoNobel’s Sikkens brand.

Further, it had commissioned a new resin plant and solvent blending facility and opened a new distribution depot in Colorado, in the US, to give it greater access to larger markets in the western US.

“What is fundamental to emphasise is that our fixed overhead costs will not increase in line with this aggressive sales increase strategy. These will remain controlled despite the hike in the current year,” said Schreuder.

However, Clark did not refute the possibility that ChemSpec may return to the market for growth funding to strengthen its equity base, but added that any capital raised would be used to fund organic growth initiatives.

“We know that we can’t keep coming back to the market for money, but we are looking at instruments that won’t dilute the value for investors,” he told shareholders.

The company did not declare a final dividend.