Sephaku warns of lower FY earnings

Sephaku Holdings on Wednesday advised shareholders that the company earnings for the 2018 financial year, ended March 31, are expected to be between 32% and 40% lower than the R68-million reported for 2017 financial year.

Sephaku attributed the decrease in earnings to poor performances from its Dangote Cement South Africa and Métier Mixed Concrete subsidiaries. Dangote’s first half-year performance was weak, leading to a loss of R16.1-million as a result of excessive rainfall in the first quarter and low demand for the interim period. However, profit for the second half was R73.9-million, an increase of R90-million compared with the first six months.

Meanwhile, the price increases implemented in February and August 2017 were sustained in most markets resulting in an effective yearly price increase of 5%. “This positive change experienced in the last six months continued into the first quarter of 2018.” Métier Mixed Concrete, meanwhile, as disclosed in the interim financial results for the period ended September 30, 2017, reported declining volumes and increasing production costs resulting in the operating profit decreasing by 17% to R51-million. The subsidiary’s net profit was R32-million for the first six months, down from R38-million in the comparative period.

Métier’s second-half performance was weaker than the first six months owing to intensifying price competition and a further decline in sales volumes. Average selling prices increased by only 1.8% and volume was down by 3.1%. The twelfth plant which started production in March 2017 contributed 7.5% to volume but added 8.5% to production costs.

Métier’s customers, who mainly constitute medium-sized building contractors, were severely impacted on by the turmoil in the construction industry, and consequently, the subsidiary experienced a high incidence of payments from customers beyond the agreed trading terms and increased credit default risk.

As such, Sephaku Holdings’ earnings a share are expected to be between 20.18c and 22.87c, while headline earnings a share are expected to be between 20.02c and 22.69c.

Sephaku is finalising its financial results, which will be released next week.