Nashua weighs on Reunert interims

Reunert has on Tuesday (21 May) reported an 8% drop in revenue for the six months ended March 2013, to R5.27 billion with the decline seen predominantly in the CBI-electric and Nashua segments.

Nashua’s revenue declined 9% to R3.308 billion, which accounts for 63% of Reunert’s total.

Normalised headline earnings per share declined by 14%, from 298 cents to 257 cents.

Operating profit was 21% lower at R583 million. “This decline was experienced across all segments and is attributable primarily to the prevailing difficult business environment,” Reunert said.

The group declared a cash dividend of 95 cents per ordinary share (2012: 95 cents per share), which seemed to cheer investors as Reunert’s share rice climbed 90 cents or 1.31% to R69.55 in early trade on the JSE.

Nashua

Nashua’s operating profit decreased by 23% to R311 million. The group’s office automation business reflected largely static revenues, with the number of units sold in the first half lower than the prior half year where certain significant tenders boosted revenues and operating profit.

Furthermore, Reunert said that rand weakness resulted in lower margins as price increases could not be passed on to customers in a difficult and competitive market.

Nashua Mobile reflected a 12% decrease in revenue. This deterioration was, in part, expected as Least Cost Routing (LCR) revenues continued to decline due to the drop in interconnect rates.

Net connections increased by 57,684. “However, these new contracts are generally at lower subscription rates which, together with reductions in the high value LCR business, resulted in a further decline in margin over the comparative period in the prior year,” Reunert said.

The group said that Nashua Mobile is in the process of renegotiating its service provider agreement with Vodacom. “Discount rates have been reduced, which has negatively affected our margins,” it said.

The businesses of Nashua ECN and Nashua Communications were merged into a single operation with effect from 1 October 2012.

CBI-electric

Under the current trading conditions, the revenue from our electrical business of R1.6 billion was reasonable, Reunert said.

It said that the delays in external infrastructure project roll-outs have significantly impacted the segment, whilst the strike within the port and transport sector affected production at African Cables in October 2012.

The instability in the mining sector exacerbated the situation further, Reunert said.

Operating profit decreased by 20% to R234 million due to a reduction in revenue, margin pressures and an unfavourable product mix.

The group’s low voltage business continued to experience strong demand for its products from export markets, mainly as a result of 4G cellular network roll-outs in Europe.

“The slowdown in the Australian mining sector negatively affected our Australian operation resulting in a lower profit than achieved in 2012.”

The telecommunications cables operation again experienced a disappointing first six months, due mainly to low demand for copper cable from Telkom.

Revenue was flat with strong demand for optical fibre cable supporting turnover. Margins remained under pressure in the fibre market, Reunert said.

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Nashua weighs on Reunert interims