Siemens' losses drag Reunert headline earnings down 20%
Wednesday, 14 December 2011
By Gugulakhe Masango
Johannesburg - Reunert, the electronic and electrical engineering firm, yesterday suffered a 20 percent decline in headline earnings a share for the year to September as a result of R65 million losses from its associate company, Siemens Telecommunications (Sietel).
Sietel experienced difficult trading conditions as a result of the volatile rand and contractual difficulties. It also lost business because of the government's delay in introducing a competitor to Telkom.
Earnings attributable to shareholders fell to R295.4 million from R370.6 million in the previous period.
Gerritt Pretorius, Reunert's chief executive, said:
"We hope we can improve next year's results because it's not right to flatter ourselves with a 20 percent decline in headline earnings a share."
However, he added that "the [latest] results were good", given the difficult conditions Reunert operated under during the reporting period.
Despite the difficulties, Reunert's share price gained 2.72 percent, or 50c a share, yesterday to close at R18.90.
Pretorius said the company had identified the causes that led to poor performance by Sietel and these had been dealt with.
"We had put in place hedging mechanisms at Sietel," he said.
"We expect Sietel to return to profitability after existing contracts have been renegotiated and to gain from a new contract in Mozambique."
All Reunert's managed operations, such as cable maker ATC and cellular service provider Nashua Mobile, performed well. Panasonic did not.
This resulted in cash generated by operations tripling to R653 million.
"The cash generated by operations was achieved despite not receiving a dividend from Sietel," Pretorius said.
Reunert's operating profit surged 29 percent to R712 million despite difficulties experienced by Sietel. Group-managed operations increased profit after tax by 37 percent to R428.5 million on sales that increased 21 percent to R6.10 billion.
The company gave back to its shareholders a dividend of R1.20 a share.
Pretorius said Reunert had a clear and strong balance sheet, with a lot of cash, and it was not looking for acquisitive opportunities. The company spent R87.2 million on increasing capacity and acquisitions, and still had R481.4 million in cash and cash equivalents.
"We expect continued growth to be achieved in the next financial year," he said.