South African industrial distributor Hudaco on Friday reported that the demand for its products from platinum mines remained under pressure, but that its engineering consumables sector was looking promising.
A significant percentage of Hudaco’s sales are derived from the South and Southern African mining industry and the manufacturing and service sectors supporting that industry.
The company said that it would continue to look beyond South Africa’s borders for organic sales growth in the mining industry, describing the local mining industry as stagnant, citing insufficient infrastructure and policy uncertainty.
“Mining investment in neighbouring countries is growing strongly and we anticipate that economic growth in South Africa will continue to remain weak over the next few years until new infrastructure comes on stream and a policy environment is created which encourages private sector investment,” Hudaco stated.
The JSE-listed company added that it was “challenging” to achieve meaningful earnings growth in such an environment, but added that its acquisition programme would continue to supplement earnings. “We expect further successes in the months ahead,” it stated.
Hudaco increased its operating profit for the six months to the end of May by 21% to R181-million. Headline earnings a share rose 17% to 441c, while sales increased 13% to R1.6-billion.
“Demand for Hudaco’s product offering was particularly strong in the closing months of the 2011 financial year, no doubt partly owing to customers buying ahead of anticipated price increases following the sudden weakening of the rand in September 2011.
“In the event, price increases did not materialise as the rand strengthened again in the beginning of 2012. Demand nevertheless remained reasonably strong until the end of March, after which there was a noticeable weakening,” the company said.
The company said that its engineering consumables segment was the biggest profit contributor to the group. “Our acquisition activity over the past few years has added significantly to this segment’s sales base and it is pleasing to note that all new businesses are performing in line with or ahead of expectations,” it said.
Sales of R1.06-billion were up 9% on last year while operating profit increased 24% to R122-million as Bearings International and Bosworth, both underperformers last year, returned to normal.
In the consumer-related products segment, sales of power tools have remained strong but trading conditions in the rest of the segment were again muted during the period under review, particularly in the security business.
Hudco stated that its subsidiary Global Communications was mainly a tender business, so it expected sales and profits to be erratic.
Segment sales were up 23% to R533-million of which R39-million, or 9%, was owing to the inclusion of Global and Pentagon for the full period.
It also announced that it acquired 100% of both Keys Makin Plastics and Quality Compounding. The final consideration would depend on the average profits over a three-year earn-out period with a maximum of R112-million.
The company declared its interim dividend number 51 of 155c a share.