Métier reports lower margins, higher revenue

30th June 2016

By: Anine Kilian

Contributing Editor Online

  

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JSE-listed Sephaku Holdings’ mixed concrete subsidiary Métier increased its revenue 13% to R874-million in the year to March 31, but subdued demand from the construction industry resulted in prices remaining flat year-on-year, resulting in Métier having to prioritise cost management and the production of high-value concretes to assist margins.

The decline in margins was owing to increased price competition and it having halted supply into a significant government contract for a period of six weeks in the first half of the financial year, owing to inconsistent payment.

Métier had completed construction of its new main operational premises, including a fully equipped workshop.  A laboratory was also built at the premises that would provide a service that was previously outsourced, resulting in the reduction of testing costs by 10%.

Métier would continue to explore viable expansion opportunities in all markets to enable it to grow its footprint and earnings in South Africa. This growth would be informed by prevailing market conditions and the strategic positioning that gave Métier an advantage over its competitors.

CEMENT
Meanwhile, Sephaku’s Cement division’s revenue decreased by 0.5% to R519-million in the period under review.
The company’s integrated cement plant in Aganang, Limpopo and grinding plant in Delmas, Gauteng were at 70% and 90% capacity utilisation by December 31, 2015 – it’s financial year-end.

“Cement’s sales volumes increased by 162% with 80% attributable to its core inland markets and up to 80% supplied into the bag market,” said Sephaku CEO Dr Lelau Mohuba.

The division continued to advance its share of the market during the year with a strong focus on the rural markets that constituted 65% of the sales volume for the financial year ended December 2015, while the Gauteng market remained highly contested.

“The import tariffs finalised in December 2015 and imposed on dumped cement from Pakistan have increased supply opportunities for the division in the coastal market of KwaZulu-Natal,” he said.

FINANCIAL OVERVIEW
The company posted a R60.42-million net profit for the year ended March 31, a 28% improvement on the profit of R47.16-million posted the year before. Headline earnings a share rose by 5.41c to 29.84c, while revenue increased to R874.3-million, compared with R775.4-million.

Sephaku noted that margins at both its Cement and Métier divisions were under pressure, with Metier’s earnings before interest, taxes, depreciation and amortisation margin having decreased from 18% to 15% and its operating margin from 14% to 12%.

“Although we recorded significant growth in revenues, our margins were under pressure due to lower pricing experienced in what has become a highly contested building materials sector. “We are however determined to retain and/or grow our market share as we pursue our optimisation programmes to improve cost efficiencies,” commented Mohuba.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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