Johannesburg - Electronic and technology company Allied Electronics Corporation (Altron) reported on Thursday that it expects its full year headline earnings per share to February 2009 to be between 25% and 35% lower compared with the previous period.
Diluted adjusted headline earnings per share are seen down between 15% to 25%. This calculation includes an adjustment for the amortisation of intangibles arising from recent acquisitions.
In explaining the reasons for the projected fall, Altron said that Powertech had experienced a difficult period as a result of the slowdown in the building and construction sector, which has impacted primarily on the energy cables business.
"This combined with the impact of the rapid and unprecedented fall in commodity prices, particularly copper from approximately $9 000 per tonne to approximately $3 000 per tonne, has required inventory write downs in line with accounting standards," it said.
Levels of manufacturing output have also been reduced in line with decreased market demand and excessive levels of cable inventory in the distribution channel.
"This has resulted in manufacturing volumes being significantly down in the second half of the financial year, which adversely impacted operating margins," said Altron.
It said that as demand is expected to remain weak until the building and construction sector recovers, management are considering mothballing certain manufacturing facilities in the energy cables business.
"The remaining businesses within Powertech are performing well in a difficult environment and have shown pleasing growth."
The company added that Altech continues to deliver strong performance in a tough trading environment, benefiting from sound strategic decisions including its high proportion of annuity income.
"Revenue and operating profits have increased as a result of a pleasing performance from most of its operations combined with the benefit of recent acquisitions. Operating margins have improved, partially as a result of the high margin Sameer ICT Group acquisition, which continues to perform well," reported Altron.
Altron says that IT division Byte has shown resilience despite current market conditions and is expected to produce results at approximately the same level as the prior year.
"The global financial crisis has negatively impacted upon the buying decisions of several financial institutions, which form a large portion of Bytes' customer base, resulting in the deferral and in certain circumstances the cancellation of orders for IT equipment and related services," said Altron.
In addition, increasing pricing pressures are being experienced for those projects that are proceeding.
"As disclosed at the half year, the Bytes group's empowerment partner, Kagiso, exercised their option to acquire a further 22% equity interest in Bytes SA effective July 1, 2008, which has reduced the level of earnings attributable to Altron after this date," concluded the company.
- I-Net Bridge