SA’s largest retailer of building materials, Cashbuild, reported a 149% surge in the number of days it had to shut stores due to local protests in the last six months of 2022.
This was revealed by Cashbuild CEO Werner De Jager when the firm released its interim results to December 25 on Wednesday. He said the company lost 117 trading days in the period under review, while in the half-year to 2021, it lost 47 trading days owing to unrest. It excluded the Kwazulu-Natal riots in 2021, which it treats as a one-off event.
De Jager said media reports are not picking up the increase in instability. “There is quite a bit of upheaval that you don’t always read about in the papers.”
Cashbuild and its chain store division P&L have 316 stores in SA, Eswatini, Lesotho and Malawi, with the bulk in SA.
The day after a protest in a town, the hardware store will be quiet with low sales, De Jager said. The company tracks how many hours a store is closed due to local protests and adds up the hours — counting 10 lost hours as a single trading day, even if a particular store was only shut for a few hours.
Municipal IQ, a web-based data and intelligence service, which monitors SA’s 278 municipalities, recorded an increase in protests in 2022 compared with 2020 and 2021, which included lockdown periods.
MD of Municipal IQ Kevin Allan said in a January press release that the increase “points to the fact that service delivery protests are now a regularly occurring and firmly entrenched social phenomenon, an accepted course of action by unhappy communities”. This is the case even though protests have not returned to the highs of 2018 and 2019, Allan said.
De Jager also warned of the “notable increase” in independent competitors and the “concerning increase of unregulated, inferior products in the market”, saying this will continue to harm Cashbuild.
Low-quality imported products are on sale, such as corrugated iron with very thin gauges and low levels of zinc coating. “As a result, the roofs are rusting within weeks of being put up.”
Glass that is thinner than that demanded by building regulations is also being sold in the market. “This is widespread and it is imported products.”
In the half-year period, Cashbuild saw sales in same-stores drop 5%, operating profit drop 47% and headline earnings 39% to R156m.
The building sector, including Builders, Itatile and Pepkor’s BuCo all reported fewer sales in 2022 than during the Covid-19 boom when people working from home invested in their houses. Cashbuild did, however, see an increase in paint and tile sales as people have money for cheaper upgrades rather than new construction.
Its operational costs increased 9%, thanks to increased advertising and IT spend, while revenue grew 4%. Price inflation was 4.5%, so the growth in sales was explained by rising prices and it actually sold lower volumes than in the comparable six months.
In terms of cash flow, net cash generated from operating activities more than doubled to R133.1m.
The company lowered its dividend payout by close to one-third year on year to 400c in its half-year results to December 25, while profit for the period fell 47.8% to R154.6m.
Cashbuild stores all have a form of backup power and are not affected by load-shedding. However, blackouts are reducing consumer spend.
Smaller “bakkie builders” say if there are four consecutive hours of load-shedding in the middle of the day, it is not worth their while to go to a site to work, De Jager said. this slowdown is reducing demand in the whole hardware store sector.
Cashbuild’s share price closed 5.10% lower at R18.88 as it reported that revenue for the six weeks after Christmas was 8% lower than the comparative six-week period. Many retail businesses have reported their sales in January were lower than the same month in 2022.
The company is likely to face higher product inflation in 2023. Sales inflation in the half-year to December 25 was only 4.5% as steel product prices dropped. But cement prices, which can make up to 25% of the group’s sales, are rising with price spikes of around 19% in January, De Jager said.
Cashbuild joined SA businesses such as Woolworths, Spur and Distell in predicting a challenging period ahead.
Updated: March 01 2023
This article has been updated with additional information
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