Hudaco Industries, an importer of automotive, industrial and electrical products, says its strong relationship with suppliers helped it navigate strikes, supply-chain disruptions and rising prices in 2021.
The company managed to pay out a record dividend and said it remained optimistic about further growth.
Hudaco’s rebound to above pre-Covid-19-pandemic levels was not simply about SA’s economic recovery, CEO Graham Dunford said on Friday. He said the group was eyeing continued strength in SA’s mining sector in 2022 as the global economy recovered, which would have a knock-on effect on manufacturing.
“We believe that the momentum we’ve had and the market share gains that we’ve built up in 2021 will continue. We don’t see any reason it shouldn’t,” he said during an investor presentation.
Hudaco's revenue grew 16.1% to R7.26bn in its year to end-November, with Hudaco declaring a total dividend of R7.60 per share, up 85.4% year on year, and which is more than a quarter above pre-pandemic levels.
Hudaco was founded in 1891, shortly after the discovery of gold on the Witwatersrand, and its R250m payout to shareholders for 2021 follows a rebound in profit to R549m, from R9m previously. Profit was also up 16.7% from 2019, which the group says is a better measure of its performance.
Hudaco said it had benefited from a decision to bump up inventory by an extra month early in the year, as it battled with supply-chain disruptions, including congestion at Durban Port that has resulted in ships becoming increasingly reluctant to try dock there.
The cost of shipping a container has risen to more than tenfold the pre-Covid cost, Hudaco said, adding, however, it has the pricing power to pass these increases onto customers for most of its products.
Hudaco also cited long relationships with suppliers that allowed it to negotiate better volume supply than it would usually have been allocated in the context of their stock constraints.
“Our businesses are all well placed to take advantage of any improvement in the economy,” said Dunford. “These results are not due to the economy; these are results because of the great management team we have and the things we’ve done over the past two years,” Dunford said.
The group listed on the JSE in 1938 and its business falls into two primary categories: a consumer-related products segment, which includes items such as batteries, automotive aftermarket parts and security equipment; and an engineering-focused segment, which includes diesel engines as well as other engineering parts used by SA’s manufacturing and mining industries.
Consumer-related products, just more than half of group sales and 60% of operating profit, rose by 5.2% to R3.8bn, with Hudaco saying this division benefited from its relationship with suppliers in terms of getting stock, even though consumer demand was under pressure.
The group’s engineering division grew sales 12.2% to R3.5bn, benefiting from strong manufacturing and mining demand.
Group sales analysis reflected strong growth in the mining, manufacturing, agriculture and wholesale and retail sectors, while declines came from the security and export sectors.
Hudaco also faced pressure from July’s riots, a three-week metals industry strike, as well as load-shedding, and called on the ANC to take another look at its economic policies as well as address its governance failures.
“We urge the government to take decisive action to implement the recommendations of the Zondo commission, to hold people to account for their actions, to in future appoint only highly ethical, competent people to senior state positions and, for the benefit of all citizens of SA, to embrace the well-known economic policies that have brought great prosperity to many modern nations over the past seven or so decades,” Hudaco said in its results.
In afternoon trade on Friday, Hudaco’s shares were 2.78% higher at R150.59, having risen almost 48% over the past two years.
Update: February 4 2022
This article has been updated with additional information.
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