ACTowers caught by surprise

Johannesburg - Africa Cellular Towers is bracing itself for tough competition as its business buckles under the pressure of the recession.

The company recorded a R48m loss for the six months to end-August 2009, compared to a profit of R36m for the comparable period.

Africa Cellular Towers attributes this to an interplay of three factors: the recession, the strengthening of the rand against the dollar and the drop in the steel price over the reporting period.

However, the company conceded it was underprepared for the severity of the downturn: "[We] initially believed that the sectors in which the company operates would not be materially impacted by the global recession but unfortunately, this has not been the case," Africa Cellular Towers said in its results statement on Wednesday.

Africa Cellular Towers offers tower design, manufacture and installation solutions. About 98% of its revenue is derived from exports into Africa.

Orders from cellular companies in Africa declined and, locally, Eskom projects were postponed. As a result, the company experienced greater competition, which in turn put pressure on margins.

The next six months aren't looking any rosier: "All indications are that the industries in which [Africa Cellular Towers] operates will remain competitive in the near future."

The company expects this to have a negative effect on its next set of results as well.

Africa Cellular Towers is looking towards an improvement in market conditions for both the telecommunications and power lines industries.

Management assured the market that the company has enough resources to continue with its operation "for the foreseeable future".

- Fin24.com