SA French posts R10m loss as crane sales drop

JSE-listed crane distributor SA French has reported a net loss of more than R10,2-million for the year ended June, compared with a net profit of R6,9-million in the 2008 financial year.

Headline loss a share was recorded at 6,60c a share, compared to headline earnings of 4,68c a share, in the previous corresponding period.

Noncurrent liabilities increased from R26,2-million in June 2008 to R40,7-million in June 2009.

This was largely attributed to the property, plant and equipment used in the group’s rental business, which was largely financed by installment sales agreements. In turn, this has resulted in increased finance costs, which have reduced earnings and headline earnings.                       

SA French noted that sales within the construction equipment supply industries, of broader construction equipment, were largely dependent on a blend of business confidence and order book size of the major players within the mining, construction and industrial sectors. Notwithstanding the order book size of any of these firms in the reporting period, the company has felt the full impact of the tightening of credit by financial institutions.

It added that whether the lack of confidence followed the retraction of credit or vice versa, the result was that the period under consideration was difficult to navigate.

“This saw a fundamental shift in many of the supply chain methods generally employed within the industry. This change in market dynamic resulted in a change of focus in SA French’s business.”

In particular, SA French has experienced an increase in demand for tower crane rentals as several of its clients sought to keep costs variable until there was clarity on the direction of the markets and an easing of criteria for granting credit by financial institutions.

However, an increase in the rental of as opposed to the sale of tower cranes has had an effect on SA French’s results.  

“Firstly, from a balance sheet perspective, SA French has made a significant investment in its rental fleet. Secondly, from a revenue and profitability perspective short-term profitability has been replaced by longer-term prospective revenues from rentals,” the company said in a statement.

SA French noted that in spite of the prevailing market sentiment, the period saw a number of important milestones achieved by the company on the African continent. 

These included a contract for the supply, delivery and commissioning of two tower cranes to be used in the construction of the condenser platform of the Medupi power station in Lephalale, as well as the sale and commissioning, and subsequent dismantling of the first "luffing jib" tower crane in Africa to one of the large listed construction companies.

“SA French also boasts the largest, newest rental fleet of tower and self erecting cranes on the continent,” the company said.                                                              

Looking ahead, SA French noted that there were early indications that the regional stability within the Southern African Development Community would provide opportunities in both rental and sale of equipment in the Southern African region, particularly Mozambique and Botswana.

“The company will continue to leverage its long-term relationships with the listed construction and mining entities in order to take advantage of upcoming infrastructural and development projects.”

Within South Africa, the company’s national footprint and service capabilities made it the supplier of choice to those that require lifting machinery, it said. “This can be seen on the skyline of all major cities across South Africa. Recent examples include hotel projects in and around OR Tambo, Sandton, the Cape peninsula and on infrastructural projects like railway station upgrades throughout the country.”