Consumer strain shows in Cashbuild earnings
Building materials retailer Cashbuild cut 500 jobs or about 8% of its workforce in 2023, as it placed a moratorium on replacing staff who left.
CEO Werner De Jager said the number of employees had “unfortunately” been reduced to 5,700, but the group avoided retrenchments or forced cuts.
Building retailers give a good indication of the health of an economy, as consumers do not feel confident enough to spend on homes and construction when there is a downturn.
Cashbuild, the owner of 321 stores, reported on Wednesday that its profit fell 20% in the six months to end-December, despite a low base in the same period a year earlier.
“Our results are testimony of the financial strain of the consumer, exacerbated by continued load-shedding and above inflationary cost increases,” De Jager said.
Cashbuild, which caters to low- to middle-income consumers predominantly in townships and rural areas, has been struggling to keep pace in recent years with the level of growth seen between 2010 and 2018, during which time its share price shot up from R74 to R500, before collapsing to its present levels of R131.58 on the JSE.
WE ARE EXPECTING TRADING CONDITIONS TO REMAIN CHALLENGING, WITH ELECTIONS FURTHER CONTRIBUTING TO THE UNCERTAINTY
For the reporting period, the company said its headline earnings per share dropped to R5.52 compared with R6.94 a year ago, suggesting consumers’ discretionary spending was taking strain from cumulative increases in interest rates, which operate with a time lag.
Cashbuild impaired R137m of book value of its business P&L, showing it is less valuable than recorded and as a result, operating profit decreased by 81% and earnings per share by 98%. The P&L business, that has 53 stores, was bought by Cashbuild in 2015 and has since underperformed.
The group would close a few more P&L stores and was converting some to Cashbuild brands, De Jager said.
P&L was trading at the bottom segment of the market where consumers were struggling, he said. The stores also competed with independent stores, where it was difficult to match prices.
The industry continued to face competition from lowerpriced “counterfeit” goods such as pipes, glass and roofing that did not meet the quality required in legislated standards, he said.
De Jager said the rest of the year would be tough. “For the foreseeable future, we are expecting trading conditions to remain challenging, with the upcoming elections further contributing to the uncertainty.”
Cashbuild declared an interim dividend of R3.25 per share, down 19% from the previous year.
The share price fell the most since September 2021 on Wednesday, down 8.31%, giving the group a market value of R3.145bn.