Italtile is doubling down on cost-cutting and digital transformation to protect its margins and market position amid mounting financial pressure on consumers and intensifying competition.
The group — which owns CTM, TopT, and Italtile — is grappling with an industrywide pricing war driven by structural overcapacity. With little room to increase prices, Italtile is focusing on operational efficiencies, supply chain optimisation and an enhanced digital and in-store shopping experience to sustain profitability.
CEO Lance Foxcroft said on Monday, after the release of the interim results to end-December, that Italtile had already reduced expenses by 5% and was adjusting production capacity by shutting down two kilns in its ceramics division.
With sales prices under pressure, Foxcroft said: “The only option we have really is to reduce costs.”
In the second quarter, Italtile’s tile factories operated at about 76% capacity, with excess production unable to find buyers. To align supply with demand, the company has temporarily mothballed one kiln each at its Samca Wall and Vitro factories.
“These kilns will be restarted once demand revives. A key focus area is logistics efficiency, where Italtile sees opportunities to lower transport costs and improve stock turnover through better planning and supply chain integration. These measures will allow the company to withhold price increases for as long as possible while maintaining profitability,” the group said.
With rising living costs and a potential two percentage point VAT hike on the horizon, Foxcroft acknowledged household budgets were under strain. Instead of passing higher costs onto consumers, the company would be reinforcing its value-for-money strategy, he said.
“Any decline in disposable income is a concern,” Foxcroft said.
At CTM, which has previously underperformed, early signs of recovery are emerging. A renewed focus on competitive pricing, customer service and product quality has helped the brand regain momentum.
To enhance its customer experience, Italtile is investing in digital upgrades to create a seamless omnichannel shopping experience between its physical stores and online platform.
Recognising that many customers research products online before making in-store purchases, Foxcroft said the group was improving its digital user experience and rolling out advanced scanning systems in stores to enhance service efficiency. Additionally, Italtile was improving supply chain transparency to optimise inventory management and further reduce costs.
The group, valued at about R15bn on the JSE, operates 211 stores after adding four new locations in the past six months. It plans to open three more stores in the next six months.
Its valuation has risen 5% over the past year, though it is down about 24% over the past three years.
A stronger performance in the second quarter helped the company lift headline earnings per share by 4% to 70.1c.
Trading profit rose 3% to R1.2bn. An ordinary dividend per share of 28c was declared, from 27c a year ago.
Foxcroft characterised the first half as divided into two distinct halves.
In the first quarter, consumer confidence and spend in the building and construction sector remained subdued amid high interest rates and inflation, which restricted disposable income and discretionary investment, and affected the affordability of renovation and new build projects, he said.
However, in the second quarter, consumer sentiment turned more positive after the formation of the government of national unity, while homeowners’ disposable income increased due to two interest rate cuts, generally lower inflation levels and payouts released by the two‑pot pension fund reforms.
The group reported a notable uptick in sales in the latter part of the review period. While that was encouraging, Italtile management said it was cautiously regarding the sustainability of that positive trend, particularly since the effect of the one‑off cash injection provided by the two‑pot retirement funds had started to diminish.
In the manufacturing division, Ezee Tile delivered a solid performance, albeit off a low base, and its flagship Vulcania factory is now operating close to design specification. Though Ceramic Industries’ quarter two results were markedly stronger than quarter one, results for the period declined against the previous comparable period, as selling prices remained under pressure and production cost reductions only filtered into the business towards the end of quarter two.
While the tile division reported slightly weaker results for the six months compared with the corresponding period, given the excess capacity in the market and prevailing price wars, the business did well to retain market share. The sanitary ware division grew its key metrics; however, there were further opportunities to improve internal efficiencies.
Looking ahead, Italtile said the improved consumer confidence and trading conditions experienced during the past three months of the review period were tenuous and may not be sustained while it also remained concerned about global trading uncertainty.
“Our stated intent is to focus on the growth levers within our control. While we are hopeful that interest rates and inflation will decline further and the economy will be strengthened through structural reforms and increased investment, our strategy is to realise the opportunities within our business. We will do this by improving our competitiveness at all touchpoints, being our iconic brands, leading‑edge technology and products, vertically integrated supply chain and resilient, capable teams and franchise partners,” Foxcroft said.
By market close on Monday Italtile’s share price was down 2.33% to R11.30.
Update: 3 March 2025. This story was updated with new information.
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