Hudaco looks abroad for growth
Interim results ‘disappointing but resilient’
INDUSTRIAL products group Hudaco Industries plans to offset what it calls a “most challenging trading environment” by stepping up sales into neighbouring states and offshore markets.
INDUSTRIAL products group Hudaco Industries wants to offset “one of the most challenging trading environments we have experienced” by stepping up its sales into neighbouring countries and offshore markets.
In its year ended November 2013, exports accounted for 9% of Hudaco’s sales.
The group on Friday reported a 2% increase in headline earnings per share to 456c for its six months ended May, with sales 16% up at R2.1bn thanks mainly to recent acquisitions. Hudaco’s operating margin to sales fell to 9.5%, from 10.8% a year earlier.
The group described its interim results as “disappointing but resilient”.
The mining and manufacturing sectors — which are Hudaco’s core markets, accounting for about half of its sales — have been under pressure: their contributions to the economy contracted in the first quarter.
Meanwhile, it said its tax challenge with the South African Revenue Service (SARS), relating to its black economic empowerment funding structure set up in 2007, was “progressing slowly”.
Hudaco is opposing the SARS claim but is making R20m quarterly prepayments on the basis of SARS’s “pay now, argue later” policy. “As expected, SARS has rejected our objections to the assessments but we will appeal that decision in the tax court. It will take some time to get a court date,” Hudaco said.
The group said the “slew of bad news about the South African economy and its prospects” would weigh on its own outlook. This included strikes, ratings downgrades and policy vacillation that had undermined business confidence. As its fortunes were closely tied to the local economy, Hudaco “must expect a difficult ride as these developments play themselves out”.
“We believe the main economic sectors served by Hudaco
Hudaco said increased emphasis would be placed on sales into markets outside SA
— the South African mining industry and the manufacturing and service sectors supporting that industry — will find a new, lower level of activity over the next months. Once we have certainty about the size of the new playing field we will assess the appropriate steps required to right-size those of our businesses serving those sectors,” the group said.
Hudaco said increased emphasis would be placed on sales into markets outside SA, including neighbouring countries, for its imported products, and overseas markets for its own brand of locally manufactured gear pumps and electrical plugs and sockets.
Hudaco CEO Stephen Connelly, who has held the position for 22 years, retires as executive director from today, while the CE of Hudaco’s bearing and power transmission unit, Graham Dunford, takes over from tomorrow.