JSE-listed Italtile says the trading conditions for the five months to November 30 were challenging, taking account of the ongoing effects of the Covid-19 pandemic, including severe global supply chain disruptions; civil unrest in July; notable price inflation of imported raw materials and finished products; and the adverse impact of load-shedding, specifically on the group’s manufacturing operations.

Moreover, competition across the industry intensified as stock availability improved and beleaguered consumers reduced or deferred spend in the context of low wage inflation, high levels of debt and escalating unemployment, it notes.

Therefore, it says that comparable sales for the review period are distorted by the high base of the prior corresponding period, which was driven by the pandemic-related work-and-study-from-home trend that shifted spending priorities and boosted demand for home improvement products.

With the reopening of various sectors of the economy, there has been a steady decline in this demand over the past five months, a trend which is likely to continue as lockdown restrictions ease further and the vaccine programme roll-out progresses, Italtile notes.

However, it says several factors contributed to offsetting the aforementioned adversities and supporting sales growth.

This included the group's local integrated supply chain, which ensured consistent availability of a wide product range.

Moreover, a majority of the group’s range is locally produced, thereby mitigating the negative impact of continued global supply chain disruptions.

Also, Italtile highlights continued low interest rates, which supported homeowners’ investment in existing and new properties; and management's focus on improving the customer’s shopping experience.

In Retail brands, good growth was reported by Italtile Retail and TopT, while CTM’s sales were in line with the prior comparable review period.

Total retail store sales increased by 3.1% compared with the previous corresponding review period and by 19.9% when compared with the 2020 review period.

For Supply Chain, sales for the review period were flat compared with the previous corresponding review period and increased by 24.6% when compared with the 2020 review period.

This disparity is primarily a reflection of significant volumes of delayed imported stock which arrived late and were invoiced out during the prior comparable review period.

For Manufacturing, sales for the review period increased by 1% compared with the previous corresponding review period and by 18% when compared with the 2020 review period.

The group’s Samca Plus factory was under construction for most of the review period and started commissioning in October, therefore direct comparison with the prior review period is not possible.

OUTLOOK

Difficult macroeconomic trading conditions are expected to persist for the foreseeable future, which will negatively affect consumer sentiment and spend, Italtile notes.

Ongoing load-shedding will also hamper the manufacturing operations specifically and impact on profitability.

Management is, however, confident that there are opportunities in the business, within its control and influence, that offer prospects for growth.

Assuming trading conditions do not deteriorate materially in the balance of the current financial year, the group remains on track to deliver sales and profit growth for the full year.