Local is lekker for Italtile after pandemic hits imports
Italtile says its largely local supply chain has been a blessing
Keeping its supply chain local has helped Italtile, which sells tiles, sanitaryware and related home-finishing products, stay ahead of the pack as the pandemic disrupts the transport of goods around the world.
In an interview with Business Times, outgoing CEO Jan Potgieter said a key factor in the group’s strong performance during the pandemic was its “integrated supply chain”, with more than three-quarters of its products procured locally from its own subsidiaries or other South African companies.
Potgieter, 52, who is retiring in December after five years at the helm and eight with the group, said Italtile’s supply chain relies on its subsidiaries, such as Ceramic Industries, and on other local manufacturers, which gave it a competitive advantage because it had better stock and “we were able to adjust to difficult circumstances”.
That is not to say the group, which owns retail brands such as CTM, Italtile Retail, Top T and U-Light, hasn’t felt the effects of the global supply chain crunch.
For example, the group’s Cedar Point subsidiary, which imports shower fittings, laminates and other bathroom furniture, faced substantial delivery delays.
“Because of the challenges we face, we had stock arriving in June that was meant to arrive in November [2020],” said Potgieter.
As a result, the group’s inventory at June 30 was “slightly higher” than it would have liked.
Potgieter said Italtile approached local group Easylife Kitchens, in which it owns a 30% stake, for help in coping with import delays.
“They were able to make bathroom vanity counters for us at very competitive prices, and we could use that as local supply to compensate for some of the imports that didn’t happen.”
With a great deal of uncertainty about when global supply chains will return to normal, Potgieter believes more and more South African companies are going to be forced to look for local solutions.
He said this was to be welcomed and that SA needed to do a “lot more to protect local manufacturing, jobs and stimulate growth”.
The advantages of having a predominantly local supply chain shows in Italtile’s results, which also benefited from the way people increased their spending on home improvement during lockdown.
Not only did the group deliver a 70% increase in trading profit to R2.56bn for the year ended June 30 when it reported results last month, but its turnover rose by a quarter to R11.6bn from R9.3bn the previous year.
The group declared a total gross ordinary cash dividend for the year of 56c a share, compared with 33c last year. A gross special cash dividend of 50c a share (2020: 23c) was also declared.
Looking ahead, the group said in a statement accompanying the results that it expected “the home improvement trend to remain relatively strong until there is a comprehensive rollout of vaccines, and stayat-home orders are eased”.
As for the group’s rest-of-Africa expansion, Potgieter said the company will continue to focus on expanding its retail operations in East Africa in particular, where it has been in markets such as Kenya and Tanzania for 15 years.
It also has operations in Botswana, Namibia, Swaziland and Lesotho, and plans to open stores in Zambia and Mozambique in the coming year.
As it stands, 23 of its 206 outlets are in these Southern and East African countries, and the group also exports Ceramic Industries tiles to markets such as Zambia and Zimbabwe. About 15% to 20% of the group’s total production is exported to other African countries.
Potgieter said the group is cognisant of how many retailers have had their fingers burnt going into West African countries such as Nigeria, and Italtile has no plans to follow suit.
He said it is easier to operate in the Anglophone East African countries than in Francophone West Africa, where the laws, language and way of doing business are different.
As far as future growth opportunities and “investment attractiveness” are concerned, Potgieter said Kenya, Rwanda and Tanzania are “in the top 10 for Africa”.
Asked about his decision to retire at a relatively young age, Potgieter — who is emigrating to Portugal — said he wants to spend some time travelling with his wife while he is still young enough to enjoy it.
“I don’t want to work until 70 and then I don’t have any time left,” he said.
“For as long as I’ve been in retail it’s been 24/7, and it catches up to you. It’s time to take a bit of a break, enjoy life a little bit more and then carry on with a couple of new projects.”
Potgieter, who before his stint at Italtile held executive positions at Massmart and South African Breweries, said he is not lost to the Italtile group because he intends continuing to play a coaching and mentoring role.
“It’s been an unbelievable journey for me and I’m really getting emotional as it gets closer to the time to leave.
“I always had this philosophy that six to eight years with a group is a good time to make a difference and also after doing six to eight years there is a need for new blood and a new vision.”
Potgieter will stay on as a nonexecutive director on the Italtile board.
Lance Foxcroft, currently CEO of Ceramic Industries, will take over from Potgieter in January next year. COO Tshepo Molefakgotla succeeded Foxcroft at Ceramic Industries in July.