Reunert sees some light after slow year
November 19, 2009
By Florence de Vries
Engineering and electronics giant Reunert is optimistic about improved earnings in the current financial year, despite a 6 percent drop in its revenue in the year to September to R10.3 billion.
Volume declines of up to 60 percent and increased bad debt in some divisions caused earnings to fall, reversing last year's strong growth when revenue rose 14 percent to R10.9bn.
Reunert, a leading specialist in the field of electric lighting and power transmission systems, battled through the year, with operating profit declining by 28 percent to R1.1bn.
Despite this, chief executive Gerrit Pretorius said he was "cautiously optimistic" that the economy had stabilised, although he did not expect any meaningful recovery for the group in the short term.
Willem Venter, an equity analyst at Prescient Securities, said the group had battled for most of the year, but that had been expected.
He said: "The only division that fared well was the Reutech division, with the consumer and infrastructure businesses lagging behind substantially."
Headline earnings were flat at R1.2bn while normalised earnings declined by 21 percent to R892 million.
The non-cash, mark-to-market accounting gain of an option that Reunert holds to sell its 40 percent interest in the South African operation of Nokia Siemens Networks mainly accounted for the difference between headline and normalised earnings.
Reutech Radar Systems fared well, fuelled by exports at a favourable exchange rate, with revenue increasing by 40 percent to R874m while operating profit increased by 55 percent to R212m.
The division develops and manufactures ground and naval search and tracking radar systems and subsystems for the SA National Defence Force (SANDF) as well as customers in the export market.
The group's mining surveillance radar is being sold or leased in many countries, but Pretorius was concerned about late orders. "Although prospects are good, there is the risk that orders may not be received early enough for the full benefit to be realised in the new financial year," he said.
Revenue at the Nashua subsidiary, comprising Nashua Mobile, Nashua Electronics and RC&C Finance, declined 1 percent to R6.4bn.
Nashua Electronics exited the consumer electronics business at a cost of R60m.
Pretorius remained confident that the restructured business would bring in annual sales of R450m, primarily through online sales.
RC&C Finance had a poor year with bad debts escalating as small businesses took strain.
But it was CBI-electric, the group's engineering division, that had the most disappointing results with volumes declining 60 percent and revenues falling to R3bn from R4bn. It had direct exposure to infrastructure development.
Venter shared management's "cautious optimism" for growth in the current year.
Reunert shares rose 4.3 percent to close at R54.32 yesterday.
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