Sephaku reports loss as demand dwindles

12th August 2020

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer

     

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With the buildings materials industry having been impacted by the continued decline in demand, as both public and private infrastructure investments decrease, Sephaku Holdings (SepHold) reported a headline loss a share of 7.97c for the financial year ended March 31.

It also posted a loss a share of 8.12c.

Consolidated revenue for the group was R727-million, with operating losses at R4.6-million and its net loss after tax at R17.4-million.

SepHold's subsidiaries are Métier Mixed Concrete and Dangote Cement South Africa (SepCem).

The group’s earnings before interest, taxes, depreciation and amortisation (Ebitda) were R34-million.

Commenting on the results on August 11, CEO Neil Crafford-Lazarus lamented the challenges facing the building materials industry over the past few years but said the company’s focus was informed by the executive team’s knowledge and expertise in the construction value chain.

“We are convinced that our strategy will result in exceptional returns for shareholders in the long term and remain fully committed to being a renowned manufacturer of high-quality building materials,” he added.

Crafford-Lazarus said the concrete sector's performance was closely linked to the highly cyclical construction industry, with the longer the period of the business cycle contraction, the more infrastructure investment declines.

By March, South Africa had experienced more than 70 months of a downturn in the business cycle, the longest on record. This led to low barriers to entry and lower operating costs, which provided an impetus to the independent mixed-concrete manufacturers to use aggressive pricing tactics to secure supply contracts.

Despite these challenges, Crafford-Lazarus said SepHold had developed counter strategies to ensure the successful implementation of Métier’s strategic objectives going forward.

Cement demand was largely constrained by a significant decline observed in the rural consumer markets which have been the driving force for bagged cement demand since 2018. 

Additionally, he commented that for cement manufacturing, the contest between primary manufacturers, blenders and importers ensued during the year. 

The Statistics South Africa data on building plans completed as approved by the large municipalities recorded unexpected year-on-year quarterly growth as large construction projects such as Fourways Mall and The Leonardo were being completed.

“The reality on the ground was better reflected by the sharp contrast of the leading indicator in building plans passed that recorded year-on-year quarterly decline throughout 2019 resulting in a [yearly] contraction of 12.6% following -1.4% in 2018.”

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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