SA’s Largest Producer Of Wall And Floor Tiling, Ceramic Industries, Is Delaying Its Call To Invest R500 Million Into A New Tile Factory Till It Is Able To Convert Its Old Order Mining Rights To New Order Rights.
SA’s biggest maker of wall and floor tiling, Ceramic Industries, is delaying its call to invest R500 million into a new tile factory until it can convert its old order mining rights to new order rights.This manufacturer has export in some Europe’s nations like Bosnia and Herzegovina,mostly ceramic tiles or in Bosnian keramicke plocice.
The mining rights are for clay, an essential raw material in the manufacture of tiles, but by itself, a questionable commodity that generates tiny interest among miners. The company applied to convert the rights in 2008.
Without a secured supply of an essential raw material the company cannot commit to an investment of that scale, claims BOSS Nick Booth.
Ceramic Industries reported lower than predicted profitability in its results to July. Higher electrical power and gas costs, increasing costs of commodities like zirconium and borax which are used in the production of glazes, and competition from inexpensive imports were cited as reasons for the poor earnings.
Group revenue decreased 3,4% to R1,5 bln from R1,6 bn. in the year under review. But net profits fell 23% to R192 million from R250m last year. Strap-line earnings per share dropped 30,6% to 785,3c from 1 131,3c per share.
Making tiles is an energy intensive business, and the rising cost of electricity, and more especially gas, is making itself felt. “The energy cost per unit (m) has risen from R1,50 twenty months back, to R3,60 currently.” The cost of commodities used in the making of tile and ceramic glazes rose by 20% to twenty five percent in the past year.
But other costs, for example maintenance and labour, came in at less than inflation. The company is in negotiations with unions regarding salary increases. The cut off point is October and Booth is hopeful that deadlock can be avoided. Though results were down overall, there were pockets of success within the group, which operates 4 tile factories, a sanitaryware factory and a bath factory in SA ; and a glazed porcelain factory in Australia.
Maybe most surprising was the factory that competes most with low-cost Chinese imports fared the best . Pegasus, which produces tiles that sell in the R40m price bracket increased both production and sales volume, growing turnover by 4%. “We run a very competitive operation,” says Booth. “Our factories are top class and we can compete with the Chinese.”
The year saw the company invest R130 million on gear upgrades and new technology. “This is generally on high definition printers for our glazes. We intend to roll the technology into all of our factories,” Booth claims.
Exports to Africa grew by twenty p.c. in the past year, also helping to drive income in the Pegasus business. “We are exporting to all our neighbours, with good expansion coming from Mozambique and Zimbab- we ; as well as further afield in Angola and the DRC. This side of the business is so promising the company is examining the chance of building a factory in one of its export markets.”
It was in the upper echelons that Ceramic suffered the consequence of Chinese imports. Vitro, the factory that produces upmarket floor tiling (more than R60m)
“We produce tiles made of red clay the type often mined in SA. But the trend is toward white based porcelain tiles. These are imported and are becoming more and more popular. There is no technical difference, and once tiles are colored and glaz- ed, there is not any visible difference eit- her. The difference is perception.
In other divisions the company scored 1 or 2 own-goals. Samca, which produces flooring tiles (R50m to R80m) wrestled with management changes and inefficiency. And while management had its eye off the ball so did product designers who did not stay abreast of trends, resulting in a loss of sales. The company had to drop its prices to get back share of the market.
The bathroom business has been turned around, with sales volumes growing generally. “We lost share of the market and let go of our costs a bit. Costs are now under control and we have passed on the savings so as to win back market share.”
To keep a tighter rein on the busi- ness, the management structure was reorganised. Booth utilized the group’s 2 most experienced chiefs, Lance Foxcroft and Pieter de Lange, to head up the sanitary ware and tile divisions respectively. With the day to day operations now in good hands, he is now more able to focus on enterprise-wide method and business development.
The Australian business had a hard year, reporting production down by 26,5% and sales down by 25% and hardly breaking even. While the economy was slow and imports high, most of the issues came down to production and commissioning Problems at the factory. “We are close to a turn-around in this business. And as the only tile manufacturer in Au- stralia we’re going to have a competitive advantage. We just need to be a little sharper.”
Booth is sure about the next year, and about producing in SA generally. “Any maker of heavy stuff should operate in the market in which they sell the product.”
He has worries about the ability of manufacturers to create new roles in SA but believes the business will remain viable th- coarse continued investment in capital infrastructure. “The challenges we are facing today are different to those of a decade gone but nothing is insurmountable.”
As is obvious from the one 500c special dividend announc- ed early on in the year, Ceramic is a cash generative company. Cash reserves decreased to R217,7 million from R435,7 million and Ceramic’s net asset value per share fell by 10,5% to seven 081c (2010 : seven 912c) as a consequence of the R304m special dividend narrated in May as reported tagza.com.
|
|
Factory-Reconditioned Cuisinart DGB-600BCFR Grind & Brew Coffeemaker, Brushed Chrome $225.00 Grinds beans, brews coffee! Streamlined European design from Cuisinart! Sleek, fully programmable unit automatically grinds whole beans, then brews up to 10 cups of great-tasting java! Famous for its ease of use. You program the start-time… up to 24 hours in advance! Refurbished with genuine Cuisinart parts by skilled factory technicians so it looks and operates like new… and you’ll feel like … |