Publications
Partners
Johannesburg - JSE-listed industrial equipment group Austro said the dwindling wood market and no relief from fixed overhead costs contributed to a 32% decrease in operating profit.
"The decrease was a result of the sharp reduction in wood's revenue without a corresponding reduction in the fixed overhead structure," the group said on Friday in its interim results for the six months to end-February 2009.
Austro recorded an operating profit of R43m, down 32%, due in part to "the strong impact" of wood's dwindling contribution. This division's turnover decreased 13% to R88m, and its operating profit fell 70% to R5.4m.
Overall, the group's revenue was up 15% to R274m, but headline earnings per share were down 48% to 5.7c/share.
The Austro group distributes and manufactures heavy-duty industrial equipment, typically power tools and machinery. Its company structure is defined along two operating divisions: woodworking and power.
Wood and power contributed 27.9% and 72.1% respectively to group revenue, and 10.9% and 89.1% to operating profit.
Austro's power division, which consists of New Way, Neptune and Quad, offers products such as generators, diesel engines and switchgear. The group's revenue last year was powered by demand from the alternative power supply industry, boosted by nationwide blackouts.
This is one of the reasons why the group's interim figures are a sharp contrast to the growth it experienced in 2008. In its annual results to end-August 2008, Austro recorded revenue up 156.03% and an increase in profit from operations of 111%.
"The rolling blackouts were an anomaly," said Lance Krowitz, Stanlib small cap fund manager. "Although the company is not doing as well as last year, this winter will most likely see the power side pick up again."
The group said its conservative policies will ensure a modest improvement until markets normalise. According to Krowitz, demand for Austro's wood products will "undoubtedly" come back.
Austro's shares are relatively illiquid and were trading down 2.04% at 48c/share on Friday. It has a market cap of R211.4m.
- Fin24.com
