Port disruptions hit Reunert’s revenue

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 22 May 2024
Durban Port. (Photograph by GCIS)
Durban Port. (Photograph by GCIS)

JSE-listed Reunert Group’s financial results for the six-month period ended 31 March (H1 FY: 2024) reflect the adverse effects of disruptions at South African ports.

Reunert is a South African company that manages a diversified portfolio of businesses in the fields of electrical engineering, information and communication technologies, as well as defence and allied technologies.

In a statement, the company says the South African macro-economic conditions facing the group remained challenging during H1 FY: 2024.

It notes that of particular impact were the national port and logistics disruptions that developed rapidly and persisted throughout the reporting period.

Earlier this year, state-owned company Transnet reportedly faced disruptions, which significantly impacted SA’s cargo transport systems. These disruptions affected rail and port operations.

In January, auditing firm PwC warned that SA’s freight rail and port deficiencies were set to continue, and businesses should brace for further supply-chain challenges this year.

Reunert notes its management teams responded well to these challenges and managed their operations to meet most customer commitments.

“Unfortunately, our Total Workspace Provider business, under the Nashua brand, was unable to resolve the logistics challenges during H1 FY: 2024, which resulted in a noteworthy shortfall of imported product and led to a large reduction in sales and operating profit in the period, which negatively impacted the ICT segment and group results,” the JSE-listed firm says.

It adds that the high level of sales in the second quarter of the 2024 financial year, and the investment in working capital required to address the port congestion, resulted in a R201 million increase in working capital during the period under review.

In addition, and as guided in the 2023 financial year-end results communication, Reunert says the residential and small commercial battery market became saturated, which resulted in volume and margin compression at the battery storage business and necessitated the business being restructured and refocused to take advantage of the improved large battery market.

It explains this resulted in a marked reduction of this business’s contribution to revenue and operating profit in the applied electronics segment.

Despite the challenges, the company says the remainder of the group performed well, and revenue increased by 7% to R6.6 billion from the R6.2 billion achieved in the six-month period ended 31 March 2023 (H1 FY: 2023).

The group’s 9% increase in operating profit to R674 million (H1 FY: 2023: R620 million) was driven by the strong results in the electrical engineering segment and the applied electronics segment’s defence cluster, it notes.

“The group continued to generate strong free cash flow, which resulted in a decrease in net interest paid and helped boost profit for the period by 13% to R475 million (H1 FY: 2023: R422 million). Similarly, the group’s earnings per share and headline earnings per share increased by 12% and 8%, respectively,” says Reunert.