Johannesburg - JSE-listed electronics company Allied Electronics Corporation's (Altron's) results have been negatively affected by the downturn in the energy cable business but restructuring has positioned the company to handle the changing market, said management.
"We took a pessimistic view about what was going to happen in the future, but it happened faster and worse than we expected," said Altron CEO Robbie Venter. "We took some tough decisions early on and we are now well positioned in the market."
Altron, through its three subsidiaries - Allied Technologies (Altech), Bytes Technology Group and Power Technologies (Powertech) - is invested in the telecommunications, multimedia, information technology and power electronics industries.
Altech, a telecommunications, multi-media and information technology firm, delivered strong results and IT company Bytes Technology Group felt the pressure of the international financial crisis, but it was Powertech that delivered disappointing results.
Powertech's businesses include the delivery of high-quality technical equipment, support and engineering expertise for the creation, management, distribution, storage and use of electricity across industries.
"Powertech was the one that faced some difficulties, particularly in the second half of the year relating to the downturn in the building and construction industry and the fall in commodity prices," said Venter.
In the previous financial year the impact of 300 retrenchments, which took effect on May 1 2009, were felt in the cable industry amounting to roughly R20m, but this year the company is hoping to reap the rewards of this cost cutting.
"This year we'll get the savings coming through since we no longer have the operating costs of that particular factory which we estimate to be between R50m and R60m on an annual basis," said Venter.
This was not the only form of restructuring for the cable company.
"We think the building and construction site will be challenging for some time and as a result we mothballed one of our facilities and transferred the production of that facilitiy to other facilities in the cable operations," he said.
Factory production has also been scaled back from a 120 hours a week to 80 hours.
"We have slowed our factory loading down, so that we aren't making too much stock and going into the new financial year with a surplus," he says.
Lastly, Altron and Powertech are set on reducing inventories and costs, this is seen in the capital expenditure of roughly R100m relating to the consolidation of Gauteng production being deferred.
Venter said that Powertech is in front of the resizing and realigning curve.
"Competitors will have to follow suit and restructure themselves according to market demand if they are to remain successful in the upcoming year," he said.
"We have made significant progress and we're in better shape than many of our competitors."
"We now need to bed down the changes that have been made and with interest rates decreasing the building and construction industry is likely to improve," says Venter.
But this improvement will take time.
"There's normally a 12-month lag between interest rates cuts and its impact on the building and construction industry. Later this year and early next year is when we would expect further resumption of growth."
- Fin24.com