Steel products group Argent Industrial felt the effects of higher interest rates and elevated inflation on consumers, but still grew as its effect was muted on trading between businesses, which generates most of the small cap’s trading.
“This growth is set to continue for the next six months of the current financial year, given that the current order books of most of the companies will carry them past year-end,” the company, valued at about R830m on the JSE, said on Tuesday in its results for the six months to end-September.
“The group has again managed to maintain its margins in this inflationary environment and with the general prices of raw materials returning to normal levels, from the highs in recent years, these margins should be maintainable,” it added.
The small cap has interests in SA, the UK and the US, ranging from manufacturing, warehousing and distribution.
Revenue grew 8.6% to R1.3bn, of which 59.5% was generated in SA, and operating profit improved 20.7% to R172.5m.
Profit increased 25.1% to R129.6m and headline earnings per share (HEPS), a common profit measure in SA that excludes certain items, 22.9% to 222.7c.
Looking ahead, Argent believes it will maintain its current growth and aims to buy back at least R15m more shares.
In its local operations, lower steel prices and greater competition resulted in lower profits for the group’s steel trading businesses, but “they remain profitable through controlled buying and stock selection”.
Argent added: “The reduction in steel prices has had a positive impact on the manufacturing entities who use steel, as input costs have reduced and, in most cases, the additional margin has been retained within the business.”
Manufacturing is Argent’s largest segment by revenue, generating 80.4% of revenue, followed by steel trading with the rest.
The group’s retail manufacturing entities maintained their performance despite lower consumer confidence in the retail market.
“Fortunately, security products and essential DIY products such as access equipment, are always in demand in any economic environment, which has assisted our retail supply businesses,” Argent said.
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