Cracked but not broken
It’s not exactly breaking news to say that the disposable income of the man in the street is under pressure, but a trading statement from Italtile demonstrates how severe the situation is becoming.
When the ninjas of the DIY world are forced to face the family with tears in their eyes, explaining in shame that they are having to pack away their grout floats and defer the purchase of the Marvel Silver Dream Gloss Glazed Ceramic Wall Tiles until the economy picks up, you know there’s trouble.
Fortunately for Italtile and its shareholders, it’s a robust operation that will be able to ride out the market downturn better than some of its competitors, and the Darwinian conditions may even spin out some opportunities along the way. Italtile says that economic pressure and sociopolitical uncertainty meant that consumers grabbed the opportunity to curtail spending on home improvements and renovations, while the new build segment slumped markedly in both the public and private sectors.
The market may have turned down significantly in the second half, but Italtile has done an excellent job of limiting the damage, keeping the decrease in HEPS down to a couple of percentage points. The group has been concentrating on reducing its operating costs and improving its working capital position, with cash reserves at the end of the period rising to R511m, while inventory levels dropped by
21%. This defensive positioning will enable Italtile to ride out the hard times and position it to bounce back effectively once the money starts flowing and the dream kitchen is back on the agenda.