Electrical engineering and technology conglomerate Reunert is pencilling in a better second-half performance in the financial year to end-September.
Reunert reported an 8% drop in operating profit to R567m off a 10% hike in turnover to R4.84bn in the half year to end-March.
Reunert CEO Alan Dickson said second-half business would be driven by a strong export order book at Applied Electronics as well as an improvement in volumes and product mix in the electrical engineering segment.
He said the information communication technologies division’s performance would be reinforced by the contribution from the recent acquisition of SkyWire.
Dickson cautioned, however, that the most notable business risks to Reunert in the second half were the rand’s strength and exchange rate volatility as well as the fiscal and organisational capacity of key state and municipal customers to place orders at a normal rate.
The market was clearly disappointed with the interim numbers, marking Reunert’s shares down 4.6% to end at R77 on Monday.
In the company’s annual report issued late in 2017, Reunert guided the market for another year of real growth in 2018, but did point out that the order mix again favoured a stronger financial performance in the second half of the 2018 financial year.
Dickson explained that the decrease in interim profitability was due largely to the significant strengthening of the rand against the dollar since December 2017. This affected the group’s profitability on the 30% of its revenue which is foreign currency denominated.
He said that Reunert saw an unprecedented reduction in demand from state-owned enterprises and municipalities, which materially affected the electrical engineering segment’s profitability.
Looking ahead to the second half, Dickson said Reunert remained well positioned to capitalise on the expected improvements in SA’s economic activity and increase in infrastructure spend.
Reunert finished the interim period with a markedly smaller net cash pile of R504m. Dickson expects the cash resources to improve in the second half.
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