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Wearne aims for profit return

Johannesburg - WG Wearne's latest financial results confirmed the trend that market conditions are hitting building groups.

CEO John Wearne described the year as one of the "most challenging" in the 99-year history of the group, posting a 109.24% decline in earnings before tax for the year to end-February.

The group reported a 10% increase in revenue to R587m and a 14% fall in gross profit to R155.5m. Gross profit margins dropped to 26% from 34%; the group attributed this to intense competition in a declining market. No dividend was declared for the period.

Earnings before interest, tax, depreciation and amortisation were 43% lower at R60.4m, while net profit before tax dropped from R54.927m to a loss of R5.075m.

Wearne blamed this on the global liquidity crisis and the fall in commodity prices, which put a halt on several projects.

"We're not profitable but still highly geared, and we're looking at turning our business around," Wearne said.

Even though Wearne said there would be no any major retrenchments, the group was planning to temporarily close one or two small sand operations. This will lead to 20 job losses.

"We think the residential market will start to come back in February or March 2010. For now, though, we have a good order book for all our quarries and aggregates divisions."

The aggregate division showed a 24% revenue increase. This was largely due to the acquisition of the Portland quarry in the Western Cape, included in the 2009 financial results from the beginning of September 2008. A 21% reduction in gross profit margins was due to lack of demand and a more aggressive pricing strategy.

While the operating results for the period were poor and the general conditions in the commercial and residential construction markets remain weak, government's increased spend on roads and infrastructure continues to create opportunities for the group, Wearne said.

No major capital expenditure is planned as the group is not running at full capacity and plans to reduce debt levels; capex will be reduced to maintaining plant and equipment, and this is not expected to exceed R15m for the year.

WG Wearne's share price remained unchanged at 55c on Friday.

- Fin24.com

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