Reunert improves operating profit by 9%
Wednesday, 12 May 2010
An interim cash dividend of 67 cents per share, up 3% on last year, was declared today.
The balance sheet remained strong with available cash of R1,4 billion. A higher tax rate reduced the growth in normalised headline earnings to 3% (238,9 cents per share).
"Our improvement in operating profit is mainly due to effective management actions taken a year ago to counter the lack of demand in the market," Reunert chief executive Gerrit Pretorius said. "Our businesses are appropriately sized for current levels of demand and we have sufficient capacity to take advantage of any improvement in the economy."
Nashua performed well and revenue grew by 7% to R3,4 billion. Operating profit increased by 2% to R292 million.
The Office Automation operations had a particularly good start to the year. Unit sales were up on the same period last year despite a very competitive market that showed no growth overall.
The Electronics operations, comprising Nashua Communications and PanSolutions, performed in line with expectations. Nashua Communications, formerly Siemens Enterprise Communications, delivered pleasing results. "The integration with Nashua Electronics is almost complete and the expected benefits of synergy are being realised. Exiting consumer electronics was a good decision, enabling PanSolutions to focus on business systems," Pretorius said.
Nashua Mobile's performance reflected the tough cellular communications environment in which it currently operates. Although net connections increased by 8%, revenue and operating profit remained virtually unchanged. The changes in termination rates have had no impact on the results to date.
The asset-backed finance activity of Nashua, Quince Capital, had a relatively good half. New business is of a high quality at margins reflecting the uncertain economic times. The first issue of commercial paper that forms part of a long-term funding programme should be placed shortly, Pretorius stated.
A slump in demand for electrical products reduced revenue by 18% to R1,3 billion. Operating profit, however, increased by 8% to R218 million as a consequence of management actions that adjusted the operations to the lower levels of activity.
Low voltage experienced strong demand for its products from international markets. For the first time, export volumes far exceeded local volumes. Rand strength, however, significantly constrained growth in operating profit.
Energy Cables were not subject to copper pricing losses as experienced in the comparable period. Sales were at lower levels, but operating margins increased as a consequence of cost reductions and improved efficiencies.
Telecommunications cables had a disappointing first period. Lack of demand for copper telecommunications cable led to a marked decline in revenue and operating profit. The anticipated roll-out of long-haul fibre networks is anticipated to start shortly.
Revenue from defence related equipment increased by 37% to R386 million. The strong rand reduced operating profit by 58% to R21 million mainly because of a mark-to-market loss of R6 million in respect of foreign currency holdings (versus a gain of R28 million in the comparable period).
Pretorius is optimistic on the future. "Assuming stable economic conditions and given no surprises, Reunert's second half performance should be better than that of the first half," he said.
Carina de Klerk
011 517 9033