Print and packaging group Novus swung from a loss to a profit for the year to end-March, but it expects supply chain disruptions, extreme cost increases and paper shortages lie ahead.
The paper and publishing group reported an operating profit of R161m in the year to end-March after a loss of R27.4m in the previous year.
Headline earnings per share, a main SA profit measure, rose from a loss of 5.4c per share to a profit of 53.2c. But it did not pay a final dividend, keeping cash on hand instead as it expects exponential paper costs and logistical challenges in future.
“Global and local macroeconomic challenges will likely continue to materially influence performance,” it said. The dividends Novus paid earlier in the financial year amounted to 90c per share and were the highest since its listing in 2015.
Earlier this year, the World Print & Communication Forum, a global body which includes an SA member, warned of global paper shortages and soaring prices.
Printing Industries Federation of SA CEO Abdool Mahomed said in a statement that huge paper price increases would accelerate switches to digital platforms and could lead to a permanent decline in demand for printing. This could result in job losses and company downsizing.
Novus said it had attempted to mitigate some of the risk of rocketing paper prices by buying extra raw material towards the end of the financial year. But the “sheer volume of raw materials required and the excessive nature of increases make it extremely difficult to offset”.
“The anticipated duration of the supply disruptions and price instability is unknown, but it is hoped that a return to a degree of normality can occur by the end of the next financial year,” the company said.
The group, once known as Paarl Media, has struggled since it lost a Media24 printing contract in 2018 and has streamlined its printing business by cutting jobs and merging two Gauteng printing plants. It also got out of an unprofitable labelling contract as the labelling business continued to underperform.
Novus Labels made an operating loss of R10.8m, which included costs to exit the main contract. Exiting its main labelling business resulted in an impairment of R69.2m in equipment and property costs and R16.7m in goodwill.
While it grew revenue 11.7% to R2.3bn, Novus expects to earn R1bn less in revenue after restructuring. This will be the result of it exiting its primary labelling contract and because of the decline in revenue from its newspaper and magazine printing division.
It says the print segment is, however, leaner and appropriately structured to suit the structural decline in newspaper demand and reduced consumer spending.
Novus’s Linbro Park building in an industrial area near Sandton is up for sale after it moved that division’s staff to its City Deep facility in Johannesburg.
Novus won a contract in a joint bid with two other companies to print, package and distribute workbooks for the department of education for three years from 2023. The contract has a two-year renewal option and will help Novus to offset some of its high costs and its inability to acquire certain grades of paper.
It has held this contract for the past 10 years in a consortium with Lebone Litho Printers and DSV Solutions.
Novus’s share price closed 0.44% higher at R2.30 on Friday. Its results presentation will be held on Wednesday.
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