ICT and electronics group Reunert reported a jump in interim profit on Wednesday thanks to record sales of its renewable power products spurred by SA’s energy crisis.
The group is set to report strong annual earnings, though it said the second half of its financial year was unlikely to be as strong as the first.
Reunert, which is valued at about R11.3bn on the JSE, has operations that include the design and manufacturing of various electrical conductors, cables and accessories, as well as ICT-related services for businesses. It also has niche businesses that cover communications and radar systems.
The electronics company is one of a handful of companies that has done well because of load-shedding given its investments into renewable energy and supply contracts with the power sector.
The market has acknowledged as much, with the group’s share price rising more than 50% in the past 12 months, though they ended the day 2.48% lower at R58.47.
“The group continues to execute its key strategic growth initiatives of investment into renewable energy,” Reunert group CEO Alan Dickson said. “Prior year actions in renewable energy have yielded good results, as evidenced by the renewable energy revenue increasing by a healthy 38% over the prior period.”
The group’s applied electronics segment had a strong first half. Revenue was up 49% to R1.6bn and operating profit almost trebled to R163m, driven by strong exports and the demand for its renewable energy products.
Group profit for the six months to end-March rose by almost a third to R422m and it announced an interim dividend of 83c a share, an increase of 10.7% from a year earlier.
Headline earnings per share, which exclude extraordinary and one-off items, certain items, improved by 36.9% to 267c.
The industrial group has 20 businesses in its three segments. It also provides solar energy and storage products via its Terra Firma Solutions, BlueNova, and Apollo Energies subsidiaries that have benefited from the government opening access to green energy as SA’s power crisis and problems at the state-owned power utility persist.
Vanessa van Vuuren, portfolio manager for the SIM Small-Cap Fund at Sanlam Investments, says Reunert has had the right mix of assets at the right time.
“The company has a particular combination of businesses that are enjoying robust demand for their products and so we see a degree of insulation from the weak macro[economic] backdrop in conjunction with considerable upside in the overall investment case in terms of what we believe the business is worth on a ‘through-the-cycle’ basis.”
Group revenue was up more than one-fifth to R6.2bn, while operating profit, grew by one-third to R620m with the help of an R44m preliminary insurance payout for the business interruption caused by the Covid-19 pandemic.
Update: May 24 2023
This story contains further information and analyst comment
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