Automotive tsunamis block Control Instruments' vision
March 31, 2009
By Thabiso Mochiko
The difficulties faced by the motor industry are so severe that Control Instruments is cautious about making a projection on the trading environment, because it will be inadequate and misleading.
Richard Friedman, the chief executive, said that although the group had warned about the real possibility of a downturn in the industry last year, what took everyone by surprise was that "what lay ahead was not just storm clouds, but several tsunamis".
The firm sells electronic equipment to the motor industry in sub-Saharan Africa, the US and Europe.
Worldwide volumes in the automotive industry have dropped by between 35 percent and 50 percent on an annualised basis.
Previously an annualised downturn of 5 percent in the industry was regarded as a major drop, he said.
In South Africa, new sales of medium and heavy commercial vehicles rose to 681 235 units in 2006, before falling to 639 039 units in 2007 and just 498 728 units last year.
Yesterday the company reported that the operating loss was R38.5 million for the year to December, from a loss of R33.5 million in the previous period. Its loss for the year from continuing operations widened to R50.17 million from R48.6 million. The losses were a result of a decline in trading and the share trading scandal by Dealstream, a stockbroking firm that went bust last year.
The Dealstream matter accounted for losses of R11.6 million, said Friedman. Turnover increased to just more than R1 billion from R840 million.
Friedman added that the industry faced "extremely tough" trading conditions.
The trading environment has forced the firm to cut jobs and salaries for senior executives at its original equipment manufacture business.
The group has retrenched 512 people since the end of 2007, shortened working hours at its factories and closed its German operations.
"Remarkably, the US operations have been steady," said Friedman, adding that the firm was looking for opportunities in North America in the emission control programmes.
Friedman added that the government needed to decide whether the automotive industry was strategic, so that it could provide financial assistance to help it compete with international companies that were receiving bailouts from their governments.
"It will be impossible to compete if we don't receive it (assistance)," said Friedman.
The share price was unchanged at 40c yesterday, while the electronics sector dropped 1.73 percent.
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