JSE-listed construction materials company Sephaku Holdings (SepHold) continued to meet its bank debt obligations during the interim period to September 30, reducing the burden on its balance sheet.

The company plans to reduce this by a further R224-million by the end of its financial year on March 31, 2022, CEO Neil Crafford-Lazarus said in a release on November 18.

Demand for cement has remained strong, albeit not at the levels of the surge that occurred in third quarter of 2020, following the pandemic-related national lockdown.

“SepCem and the other cement manufacturers await the International Trade Administration Commission decision to impose effective tariffs against cement and clinker imports. If positive, the decision will provide much needed demand resulting in increased sales volumes for domestic producers who create employment for South Africans.

“Imports absorb approximately one-million tonnes of demand annually, which would improve their financial performance if available for the incumbents. SepCem is well placed to benefit from the tariffs because the KwaZulu-Natal market constitutes 15% to 20% of its annual sales volumes which is the port of entry for almost 70% of the imported cement,” he said.

However, further downstream, mixed-concrete demand remains constrained, which has placed downward pressure on volumes.

“We remain cautiously optimistic for the planned government infrastructure plans to stimulate the economy, which, if implemented, would provide impetus to the construction value chain. Metier's improved profitability margins demonstrate the benefits of the turnaround.”

Group consolidated revenue reached R411.8-million, up from R291.1-million during the first half of the company's 2021 financial year, and SepHold posted a net profit of R17.8-million, up from a net loss after tax of R29.6-million during the prior half-year period.

Basic earnings a share were 6.98c, an improvement on the basic loss a share of 11.65c in the previous interim period.

Similarly, headline earnings a share were 7.03c, compared with a headline loss a share of 13.47c in the prior comparable period.

The group's net asset value a share increased to 447.81c, up from 421.08c in the comparable half-year period of the prior financial year.

Further, subsidiary Métier achieved an earnings before interest, taxes, depreciation and amortisation (Ebitda) margin of 10.8% at R44.6-million, up from 9.4% at R27.4-million in the prior comparable period. The company achieved a net profit after tax of R20.1-million, up from a net profit after tax of R7.5-million in the prior comparable period.

Dangote Cement South Africa, or SepCem, achieved sales revenue of R1.197-billion, up from R883.7-million in the comparable half-year period of the 2021 financial year, and an Ebitda margin of 12.4% at R148.8-million, up from 6.8% Ebitda margin at R59.8-million in the first half of the 2021 financial year.

SepCem achieved a net profit after tax of R7.7-million, compared with a net loss after tax of R83.7-million in the first half of the 2021 financial year.

The capital balance on the SepCem project loan is R786-million, and Métier is R55-million with a target to reach balances of R570-million and R47-million respectively by year-ending March 31, 2022, Crafford-Lazarus said.

“The July social unrest characterised by the looting and destruction of retail outlets impacted our performance during the interim period. Specifically, SepCem's bagged cement volumes were negatively impacted owing to damaged hardware retail branches that were subsequently closed. Engagement with retail chains has revealed that several outlets have not reopened, but plans are in place to repair them soon.

For Métier, there was an indirect impact mainly owing to the rioting in the KwaZulu-Natal province that resulted in downtime of five days and, therefore, a loss in revenue for this period, he said.

“As we enter the second half of the 2022 financial year, we continue to operate within the Covid-19 protocols and retain the cautious approach of implementing stipulated guidance.

“As we get to the end of the 2021 calendar year, I am sure numerous management teams would echo my sentiment that the worst of the pandemic seems to be over. Although we lost valuable colleagues who were essential participants in our pursuit of group success, we have renewed focus and energy to achieve our goals going forward,” Crafford-Lazarus said.