Automotive, industrial and electrical consumable products supplier Hudaco has posted an operating profit of R357-million for the six months ended May 31, which is a notable 351% growth compared with the operating profit posted for the six months ended May 31, 2020.

The company has advised shareholders that, as a result of the impact of Covid-19 in 2020, that it would be more useful to compare the six months under review to the performance achieved in the six months ended May 31, 2019.

Hudaco had posted a R297-million operating profit for that interim period.

The company was able to resume an interim dividend of 240c apiece, compared with an interim dividend of 190c apiece declared for the six months ended May 31, 2019.

Basic earnings a share for the period under review were 686c apiece, compared with earnings a share of 533c a share in the comparable period in 2019 and a loss a share of 738c apiece in the comparable period in 2020.

Hudaco generated trading cash of R458-million in the reporting period, of which R65-million was reinvested in working capital as the company is stocking up in anticipation of the busier trading in the second half of the financial year.  

Cash generated from operations therefore amounted to R393-million in the six months under review, compared with R301-million cash from operations in 2019.

The company says it continues to struggle to get stock into its warehouses, owing to longer delivery times and higher prices from most suppliers, coupled with container shortages and delays at inefficient ports.

Meanwhile, the company’s consumer-related products segment continued to benefit from strategic diversification over the past few years and it accounted for 52% of group sales and 63% of operating profit in the six months under review.

There are 11 businesses in this segment, which, combined, reported revenue of R1.7-billion and operating profit of R245-million for the period under review.

The engineering consumables segment experienced positive trading conditions, with the segment showing good growth in turnover from the agriculture, mining and manufacturing sectors. Engineering consumables accounted for 48% of group sales and 37% of operating profit.

This segment comprises of 18 businesses, which together generated turnover of R1.6-billion and operating profit of R143-million.

Hudaco, in the six months under review, bought back 338 563 shares at an average cost of R105 apiece, amounting to R35.7-million worth of shares.

Since the end of the reporting period, the share repurchase programme has been handed over to a broker and without further reference to the company, resulting in a further 65 583 shares having been acquired.

The repurchase programme started on April 1 and the shares will be delisted and cancelled in due course.

Hudaco CEO Graham Dunford says the company is optimistic that the momentum its businesses have shown in the first six months of the financial year will continue into the second half.

He hopes to see the synergies and benefits of some consolidations made in the security and hydraulics businesses of the company coming through, while Hudaco continues managing its capital allocation to the conditions as they unfold – be it by increasing stock, acquisitions, paying down debt, share buybacks or dividends.

Hudaco chairperson Stephen Connelly says recovery programmes globally are boding well for commodities, but have given rise to supply chain constraints.

Of immediate concern is electricity supply, port delays, degradation of municipal infrastructure and the third Covid-19 wave of infections being experienced, but Hudaco has been able to manage well through these challenging times.