Italtile warns of a likely fall in profit

Italtile, SA’s biggest retailer and manufacturer of tiles, bathroomware and related products, has warned that its profit is likely to decrease in its current financial year as weak economic growth and tough trading conditions persist.

“In the absence of strong sales volumes and optimal use of manufacturing capacity, the business’s cost base and profitability will be negatively affected,” the company, valued at about R14.5bn, said on Monday in a voluntary sales update for the five months to the end of November.

Consumer confidence remained subdued in this period as the construction and building sector was hitt by economic challenges, including little growth, high inflation, rising living costs and elevated interest rates, which drove up building costs, resulting in fewer new projects or renovations. “The generally softer retail demand and overstocked position of many wholesalers in the industry continued to affect sales in the manufacturing businesses negatively,” the company said.

“Competition and margin pressure intensified across the industry, with opportunistic importers sacrificing margin to gain market share.”

The group, which has brands such as CTM and TopT, experienced a 2.9% fall year on year in turnover, hit its integrated import supply chain businesses, with manufacturing sales decreasing 5.9% year on year.

Sales in the building industry have fallen since the Covid-19 home improvement boom in 2020 and 2021, when consumers spent on their houses as they worked and socialised at home due to the pandemic.

In August, the group reported in its 2023 annual results that profit fell 14% to R1.7bn and headline earnings per share (heps), a common profit measure in SA, decreased 13% to 132.3c.