Johannesburg - Distribution and Warehouse Network (Dawn), a JSE-listed building materials group, says its business will continue growing despite the global economic slowdown.
"While the group is cognisant of factors beyond its control, and having due regard to the challenging global economic environment... it remains in good shape to weather the storm," it said, after the release of its results for the six months to end-December 2008 on Tuesday.
Its board said it "remains positive" about Dawn's long-term growth prospects as it is well positioned for significant participation in the infrastructure programme. Dawn's volume growth should be further supported by the acceleration of consequential building activity from large infrastructural projects.
Revenue rose by 15% to R2.2bn, while operating profit grew 6% to R235m and headline earnings and earnings per share of 87.1c increased by 11%.
Dawn, a manufacturer and wholesale distributor of mainly local branded hardware, sanitaryware, plumbing, kitchen, engineering and civil products - including Cobra taps and Vaal sanitaryware - said its interim saw two distinct quarters.
"The first quarter was solid, with the second quarter strongly impacted by the knock-on effects of the global economic downturn and credit crunch, as well as delays and cancellations in selected civil, municipal infrastructure, industrial and mining capital projects."
It said revenue was supported by growth in both building sector and infrastructure revenue. Dawn's revenue split comprised an estimated 52% contribution from building activities and 48% from infrastructure projects during the first half of the 2009 financial year.
"In building, there was sustained demand from residential refurbishment and upgrades, rural demand growth, [and] government low-cost housing, as well as accommodation around new infrastructure," it said.
In infrastructure, the group experienced significant pressure from delays in the awarding of civil and municipal tenders.
The group reported a 90 basis-point reduction in its operating margin for the period to 10.6%. This was due to the impact on volumes of a weaker economy and delayed contracts, as well as Dawn and industry de-stocking in a slowing market, it said. "The margin impact of de-stocking is not anticipated in the second half [of the 2009 financial year]," it said.
It plans to improve its margins by increasing internal efficiencies and optimised factory loadings and production.
Cash generated from operating activities, after servicing interest, increased by 74% to R183m, which Dawn attributed to improved working capital management.
Looking ahead, Dawn believes that an increased export drive on the back of the depreciating rand will result in a broadened geographical footprint. Import substitution underpinned by the continued currency weakness, together with improved customer service levels, will increase its local markets.
- Fin24.com