Building sector slowdown hits WG Wearne
Johannesburg - Construction materials provider WG Wearne [JSE:WEA] said on Tuesday that it expects a headline loss per share of between 17c and 19c and basic loss per share of between 23c and 25c for the year ended February 2010, compared to the restated headline loss per share of 11.25c and a loss per share of 11.19c, reported for 2009.
The group said a reduction in earnings is mainly the result of continued weak trading conditions amid a slow-down in the residential building market, and the impact of a fuel hedge entered into during November 2008, which expired during November 2009.
"The past financial year has been particularly challenging and as a result the Wearne directors have embarked on a complete restructure of the group's operations and looked hard at where costs can be cut, margins improved and revenues enhanced," it said.
WG Wearne said the following initiatives would see significant cost savings going forward:
- The group's various legal entities will be rationalised in order to reduce the associated cost of administration and improve operational efficiencies;
- Shared services will be centralised wherever possible in order to achieve greater purchasing synergies and administrative cost savings;
- Staff numbers have been reduced by approximately 15% year-on-year through retrenchment and natural attrition in order to achieve greater productivity and reduce payroll costs; and
- Finance charges will reduce by an anticipated 20% as a result of a reduction in the amount of long-term debt outstanding.
WG Wearne noted that the elimination of the diesel hedge entered into in 2008 would also result in an annualised cost saving of approximately R18m.
"Taking the effect of all the expected cost savings listed above into account, as well as an improving order book, the directors are expecting the 2011 financial year to be significantly better than 2010," it concluded.
The group expects to release its results on the week ending May 28 2010.
- I-Net Bridge