Go­ing through the roof

Finweek English Edition - - Business strategy - GUGU­LAKHE MASANGO

THE ROOF­ING and cladding mar­ket in SA is on the fast track, fu­elled by the buoy­ant de­mand in the con­struc­tion in­dus­try for build­ing ma­te­ri­als and the in­fras­truc­tural re­quire­ments in the run-up to 2010 Fifa World Cup.

The in­dus­try is val­ued at about R7,7bn a year and is ex­pected to con­tinue to grow. “We es­ti­mate the mar­ket in SA to be around 200m sq m, with metal roof­ing and cladding mak­ing up around 39% of the to­tal,” says Stephan Schoom­bie, mar­ket­ing man­ager of Global Roof­ing So­lu­tions (GRS), one of the in­dus­try’s largest in­de­pen­dent un­listed firms.

He says GRS is see­ing an­nual growth of about 10% in the de­mand for metal roof­ing.

“With a real de­mand for hous­ing, and in­dus­trial ex­pan­sion due to cur­rent eco­nomic growth pat­terns world­wide, we be­lieve this growth is sus­tain­able.”

Scarcity of of­fice and ware­house space is mak­ing the com­mer­cial sec­tor at­trac­tive, al­though growth in the res­i­den­tial sec­tor is slow­ing.

GRS ex­pects the res­i­den­tial sec­tor to grow on av­er­age 4% to 6%, in line with economists’ ex­pec­ta­tions.

The in­dus­try con­sists of metal roof­ing sup­pli­ers such as Clotan Steel, GRS (owned by man­age­ment, with sub­stan­tial hold­ings by Absa Bank and em­pow­er­ment firm Mediro In­dus­trial Hold­ings), Har­vey Roof­ing (a sub­sidiary of Murray & Roberts), Mac­Steel Roof­ing, Safin­tra, and al­ter­na­tive roof­ing ma­te­rial sup­pli­ers such as Everite (a sub­sidiary of Group Five), La­farge and Mar­ley.

Be­cause most roof­ing and cladding com­pa­nies are not listed, it’s dif­fi­cult to get wider com­ment.

Ac­cord­ing to Group Five unau­dited re­sults for the six months to 31 De­cem­ber 2006, Everite’s rev­enue was R232m com­pared with R216m in the pre­vi­ous pe­riod. Everite plans to in­vest about R50m to in­crease ca­pac­ity to take ad­van­tage of the ever-in­creas­ing low-cost hous­ing ini­tia­tives.

Har­vey Roof­ing, which con­trols about 2% of the coated metal roof mar­ket with a rev­enue cy­cle of R190m to R230m, op­er­ates in the af­ford­able hous­ing space.

Di­rec­tor Lee Cochrane says: “We’re not see­ing any spin-offs at the mo­ment on low-cost hous­ing.” This, how­ever, is likely to change fol­low­ing Fi­nance Min­is­ter Trevor Manuel’s Bud­get an­nounce­ment that the hous­ing minis- try will re­ceive an ad­di­tional R2,7bn, bring­ing the to­tal al­lo­ca­tion for the next three years to R32bn.

Har­vey Roof­ing and Everite are in line to sup­ply mu­nic­i­pal­i­ties, which will use the ad­di­tional al­lo­ca­tion from Manuel to build more af­ford­able hous­ing.

Asked if GRS would con­sider list­ing on the JSE’s AltX, Schoom­bie says: “At this stage, the com­pany can fund its ex­pan­sion plans and cap­i­tal re­quire­ments from other sources, so a JSE-list­ing is not on the cards in the near fu­ture.”

Grow­ing de­mand for prod­ucts in the next 10 months will come from within the in­dus­trial sec­tor, spurred by the re­quire­ment for 500 000 houses a year up to 2011, with Gau­train, the Soc­cer World Cup prepa­ra­tions and Gov­ern­ment’s planned in­fra­struc­ture spend­ing kick­ing in. No won­der the roof­ing and cladding com­pa­nies are pos­i­tive about growth prospects.

“We be­lieve there will be sus­tain­able growth up to at least 2012 in the build­ing in­dus­try,” says Schoom­bie.

No ceil­ing on growth. Stephan Schoom­bie

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