Hudaco eyeing acquisitions amid difficult market conditions
As JSE-listed Hudaco Industries continues diversifying into markets with stronger growth potential, acquisitions remain on the cards as the company feels the pinch of a stalled economy.
Businesses in the automotive, food and beverage and communication sectors are of particular interest to Hudaco, as these markets are considered attractive, with better prospects in terms of growth in a struggling economy.
“South Africa, right now, is a difficult place to do business,” said CEO Graham Dunford at the firm’s half-year financial results presentation in Woodmead, earlier this month.
Trading conditions remained “extremely tough” in the aftermath of a severe drought, an anaemic economy and a drawn-out low commodity price environment.
During the six months to May, Hudaco struggled with pricing, owing to a weaker rand and, amid lower demand, aggressive pricing pressure reduced the return on sales, particularly in the engineering sector.
Further, consumer spending had slowed and would likely remain under pressure.
DepressedThree of the sectors served by Hudaco, namely mining, manufacturing and agriculture, were likely to remain depressed until commodity prices increased and the drought had broken.
“Businesses heavily exposed to these markets are bound to battle to get organic growth and will have to manage the relationship between sales, gross margin and expenses even more carefully until conditions improve,” said Dunford.
However, Hudaco had successfully implemented measures over the past few years to reduce its reliance on mining and manufacturing, embarking on acquisitions aimed at diversifying its markets.
In December, Hudaco acquired hydraulic cylinder manufacturer and repairer Hydraulic Engineering Repair Servicea for around R64-million.
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