The sales boom at building and hardware stores across SA is not abating, with companies continuing to report strong double-digit turnover growth in this segment.
Build it and Cashbuild reported their best turnover growth in five years when they recently released results, while JSE-listed brick manufacturer Brikor said its order book was full for the next 52 weeks.
Brikor CEO Garnett Parkin says the group expects to "see another good 24 to 36 months coming our way", adding that the group's customers include low-, middle- and high-income consumers.
The growth in turnover for Spar’s Build it brand for the six months to
end-March
— 26.2%
It appears the results of building material suppliers are being driven to a significant extent by lower-income earners in rural areas, townships and cities who are buying bricks, timber and cement to add on rooms, do extensive renovation work and in some cases build homes from scratch.
In addition, middle-class consumers are buying decorative and DIY supplies, which is helping underpin sales.
Rob Lister, MD of Build it, which is a division of grocery group Spar, says the division's turnover growth of 26.2% for the six months ended March 31 2021 was "really quite extraordinary". Spar owned 396 Build it stores as at March 31 2021.
"This business hasn't seen double-digit turnover growth since 2016. The year ended September 2016 saw turnover growth of 11.6%.
"The majority of this growth is coming from the rural building sector. With more family members required to stay at home due to the Covid-19 pandemic, the need to create additional space or extend dwellings has motivated an explosion in small building projects," says Lister.
He says an increase in government subsidies has supported spending in rural areas, and interest rate cuts have assisted consumers with short-term lending and reduced mortgage repayments, "assisting both rural and urban consumers with building projects and home improvement".
"Our urban stores, which contribute less than 20% of our business, have seen an increase in home improvement and décor sales."
Lister says the group has seen high levels of growth since Build it stores reopened on May 1 last year following their closure during the initial hard lockdown, but that he does not expect this to continue indefinitely.
"The level of growth since then has continued for longer than we expected it to. However, as of May 1 2021 we are experiencing the effect of the high base."
Cashbuild CEO Werner de Jager says sales of structural material are doing particularly well at the group, which has 317 outlets under its Cashbuild and P&L Hardware brands.
"There has been double-digit growth in cement and structural timber, and bricks were also selling well. It's all the items that you typically use to build a house, with roof coverings, window frames and door frames also doing well.
"But the decorative side of things, floor tiles and paints and DIY items, is also doing well. It's been good overall."
All of this helped the group report a 21% increase in revenue for the six months ended December 27 when it released results in March. De Jager says Cashbuild's customers typically include "bakkie builders", who account for a big portion of its revenue, along with the "build-it-yourself customer in rural areas" and DIY customers in urban areas.
He says there were probably a number of factors at play behind the sales numbers. These included people spending more on extending homes as they saved money by not travelling during the various lockdowns in the past 14 months, government relief and social grants, and the possibility the informal economy is larger than thought.
"For a period of time there was also probably pent-up demand. If you just look at us, we estimate that during the five weeks when we were closed during the hard lockdown we lost in excess of R600m in revenue. Hopefully some of that came back again but we can't really pinpoint any one thing driving the growth."
But De Jager says what is clear is that people are prioritising spending on their houses and this is positive as it sets the scene for more maintenance and painting being required later on by the homeowner.
De Jager says the revenue growth from a "percentage perspective" is the best the group has seen in "five years".
Asked how long he expects this strong growth to last, De Jager says that is the "million-dollar question we've tried to get our heads around and it's a difficult one to answer because we are all expecting it to slow down at some point".
"When you look at the bigger economic situation in the country, unemployment is ticking up. In general there is not good news on the macro side, so at some point we do expect to flatten out a bit. We just hope, though, we have seen a new level and that it won't go back to levels that we've seen pre-Covid and the years leading up to that."
Nick Booth, CEO of Corobrik, SA's largest brick manufacturer, whose face-brick order book is running about three months ahead, says there is no doubt the steadiest demand for building materials, along with bricks, is coming "from the residential market".
"What you are seeing out of Cashbuild and Build it and the other guys is the renovation market and residential, where the homeowner or small builders are building one-off houses or small complexes with a view to getting some turnover. There's no doubt that is where we are seeing the pull," says Booth.
One thing is clear, though, the growth in building material sales is certainly not being driven by big developments in the formal construction market, especially large-scale residential and office projects. Rather it is individual homeowners driving demand.
"Go to Higher Ground [the restaurant at St Stithians College, which offers a panoramic view of Sandton] and look at Sandton and you can't see one crane. There used to be 15 to 20 cranes in the mid-2000s," says Chris Renecle, MD of Johannesburg developer Renprop, which specialises in residential property but also develops offices and industrial real estate.
He says "there is little to no activity" in the large, formal residential building market.
"We [Renprop] are busy with two jobs at the moment and we've got one about to start. They are small but we are one of the very few busy at the moment. Commercially there is some construction in the industrial distribution centre and warehousing market and then you've got some hospital development. There is zero office construction on the go."
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