As a result of the benefit of the rand weakness having been counteracted by its volatility, and strikes in the mining and automotive sectors, JSE-listed Hudaco Industries did not finish the 2013 financial year as strongly as it expected to, Hudaco chairperson Royden Vice said on Friday.

Hudaco CE Stephen Connelly explained that the company’s second half of the year was usually stronger than the first; however, over the past two years its performance had been adversely affected by industrial action in some of its key business sectors.

He added that while the rand declining by 15% against the dollar, during 2013, would usually be good for the company, it did not have the desired effect during the period under review as a result of volatility.

Hudaco posted a 13% rise in sales and a 7% increase in operating profit during the year ended November 30, the company reported on Friday.

The group achieved turnover of R3.9-billion, up from R3.5-billion during the prior corresponding period, while operating profit reached R469-million as opposed to R437-million in 2012.

Hudaco’s businesses were divided into two segments, namely engineering consumables and consumer-related products.

The engineering consumables segment was the group’s biggest profit contributor, comprising 63% of its turnover and 59% of its operating profit.

This segment’s turnover grew by 9% to R2.5-billion, while operating profit grew by 4% to R292-million during the year.

Connelly pointed out that manufacturing and mining made up 66% of the engineering consumables segment, therefore, increasing the impact industrial action in these sectors had on the business segment.

Meanwhile, the consumer-related products business segment’s turnover grew by 20% during the year to R1.5-billion and operating profit increased by 18% to R199-million.

However, profit attributable to shareholders dropped to R294-million and headline earnings per share (HEPS) dropped by 13% to 928c.

Hudaco FD Clifford Amoils explained that the decline in HEPS was owing to an increased tax charge, as a result of the restructuring of the company’s black economic-empowerment financing and the accounting requirement for earn-out adjustments.

The net effect on profit after tax of this restructuring was R33-million a year, or 103c a share, he said.

Amoils further stated that the group was in a healthy financial position, noting that the group would continue to invest in new businesses, with the company having raised a R300-million revolving credit facility, giving it the scope for more acquisitions.

He also said the weakness of the rand should be positive for the company going forward; however, Amoils warned that further volatility could hold risk for Hudaco.

Connelly added that the R25-million-a year cost-cutting measures that were implemented at the group’s Bearings International and Deutz Dieselpower businesses during 2013, in a response to lower demand from mining customers, would benefit the company during 2014.

Growth in mining activity in neighbouring countries also boded well for Hudaco and exports were expected to increase further during the coming year, he said.

The company declared a final dividend of 310c a share for 2013.