JSE-listed building materials company Sephaku has posted a group net profit of R20-million for the financial year ended March 31, with headline earnings per share (HEPS) of 6.09c.
Sephaku’s group of companies include Sephaku Holdings, Métier Mixed Concrete and Dangote Cement South Africa (SepCem).
The group profit is on the back of a R17-million loss incurred in the 2020 financial year, while HEPS were up from a headline loss a share of 7.89c.
Métier made sales revenues of R2.4-billion during the period under review, with earnings before interest, taxes, depreciation and amortisation (Ebitda) of R55-million and a net profit of R17-million.
SepCem, meanwhile, had sales revenue of R2.4-billion, an Ebitda of R382-million and a net profit of R44-million.
Group CEO Neil Crafford-Lazarus says the 2021 financial year was a contrast of the pandemic hard lockdown and the post-hard-lockdown phase, with the Alert Level 5 restrictions halting the group’s operations, resulting in limited administrative and maintenance activity.
“The uncertainty of this initial phase led us to negotiate with the lenders on amending the debt repayment terms to accommodate the lack of activity,” he says.
As a result of these negotiations, Sephaku successfully provided the prerequisite capital injections for both Métier and SepCem to enable the lenders to suspend capital repayments for nine months and five months of the 2021 financial year, respectively.
Crafford-Lazarus adds that Sephaku’s board had decided to reappoint Kenneth Capes as Métier CEO on April 1, 2020. Capes was mandated with restructuring the subsidiary’s business model to better align with the prevailing trading environment.
“The severe macroeconomic impact of the pandemic accelerated the implementation of the restructuring process to ensure that Métier emerged a lean and profitable business by the end of the financial year,” says Crafford-Lazarus.
He notes that the improved comparative results are proof of quick action by Capes and the success of restructuring.
However, Crafford-Lazarus notes that the ready-mixed concrete sector continues to experience low demand and high competition as a result of the significantly lower cost base of the independent manufacturers and forward integration by the aggregates producers.
“Nonetheless, we are confident that the restructured Métier is well positioned to be profitable and competitive in new markets such as the Western Cape, where a plant is being constructed with production targeted to commence during financial year 2022,” he enthuses.
In terms of the cement business, Crafford-Lazarus says the company is surprised by a surge in bagged cement demand in the post-hard-lockdown phase, largely assumed to be an unexpected result of additional consumer discretionary income.
“The increase in cement demand appears to be linked to the increased home renovations as numerous people worked remotely during the year,” he suggests.