JSE-listed electronics company Reunert experienced a lack of demand for its copper cables in the telecoms sector.
The company yesterday released its results for the six months to March, and said “subdued” market conditions resulted in flat revenue of R5.1 billion.
Despite the slowdown in sales, the company grew operating profit 9%, to R582 million, and declared a 67c dividend, a 3% increase on last year. The company ended the year with R1.4 billion in the bank.
“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,” says CE Gerrit Pretorius.
He explains that the company's business units are “appropriately sized for current levels of demand and we have sufficient capacity to take advantage of any improvement in the economy”.
However, headline earnings per share dropped 5%, to 223c, while earnings per share were down 4%, also to 223c.
Winners and losers
Reunert's CBI-electric unit was let down by a lack of demand for copper telecommunications cables. The unit reported revenue down 18%, to R1.3 billion. Operating profit, however, increased by 8%, to R218 million.
fibre networks is anticipated to start shortly,” says the company.
The Nashua unit performed well, growing revenue 7%, to R3.4 billion, and boosting operating profit 2%, to R292 million.
The division's office automation operations had a “particularly” good start to the year, says Reunert. “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 says.
Nashua Mobile's performance reflected the tough cellular communications environment in which it operates. Although net connections increased 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 says.
Looking ahead, Pretorius is optimistic. “Assuming stable economic conditions and given no surprises, Reunert's second half performance should be better than that of the first half.”
The company's shares closed 15c higher yesterday, at R57.25.
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