Flooring, water and chemicals specialist Accéntuate experienced a tough six months to December 31, 2017, with the company moving from a R3.5-million profit in the same period in 2016 to a loss of R1.78-million.
Accéntuate says its business has suffered on the back of depressed macroeconomic conditions, political uncertainty and a lack of confidence in the country.
CEO Fred Platt notes, however, that the recent weeks “hopefully, signalled the end of ten years of decline” in government’s infrastructure spend.
“At the end of last year, we were forced to ask ourselves if we should continue to manufacture in South Africa.”
Platt says he is positive that new President Cyril Ramaphosa, elected in February, will bring about a change in government expenditure.
“We believe him when he talks about localisation, manufacturing and infrastructure spend.
“It is like the Reserve Bank said at Davos – the biggest stimulus package in the economy is confidence, and we can see that confidence is returning to South Africa.”
Platt warns, however, that this confidence will not have an “enormous impact on Accéntuate over the next six months – we will remain under pressure for the next year”.
Accéntuate’s revenue for the six months under review decreased by 1.3% to R157.3-million, owing mainly to lower sales volumes in the FloorworX business.
The flooring business operations contributed 78% of group sales.
Production volumes at the East London flooring manufacturing facility were “purposefully” managed down as a result of low government demand for classrooms, clinics and hospitals.
Margins were impacted on by this lower level of production, as well as currency volatility, as a significant proportion of FloorworX product is imported from abroad.
The Pentafloor acquisition was concluded by the end of September last year.
Pentafloor is a supplier in the access (raised) flooring market in South Africa.
The acquisition provides Accéntuate with a product category that is currently not in its repertoire, allowing it to diversify further from government infrastructure to commercial flooring.
Platt says the company is considering adding more products to its portfolio in a continued attempt to diversify.
Accéntuate’s Environmental Solutions Business, which comprises the chemical blending Safic business operations, contributed 22% of group sales.
Revenue was flat at R34.9-million. Increasing costs resulted in an operating loss of R2.1-million.
Sales volumes were affected by lulls in the manufacturing and mining sectors.
A new sales director is to focus on gaining market share in specialist chemicals sectors.
A three-year plan for organic growth has also been put in motion.
Accéntuate’s water treatment business, in which it owns a 40% share, is still to contribute significantly to the group. However, Platt aims for a marked change in the next 12 months, as South Africa appears to have woken up to the crisis it faces in terms of water supply.