Hudaco encouraged by signs of improved activity and demand

Hudaco has reported lower annual earnings, but is encouraged by signs of improvement in activity and demand from the last quarter of the year.

The group, which imports and distributes industrial, automotive and electronic products, reported a 5.8% decline in revenue to R8.38bn for the year to end-November, while profit was down 18.4% to R546m.

Headline earnings per share (HEPS) declined 6.3% to R20.12. The group declared a final dividend of R7 per share, making the total dividend of R10.25 — unchanged from the previous year.

Cash generated from operations was up 71% at R1.5bn, the group said in a statement on Thursday.

Hudaco noted that its comparable earnings per share (EPS) were down 15% at midyear, it was able to claw back much of the deficit in the second half to end only 6% behind for the full-year.

The group said that for the five months from the formation of the government of national unity (GNU) to the end of the financial year, through the strong management of gross profit margin, tight control of expenses and the reduction of inventory, operating profit increased by 0.2%, and headline and comparable EPS were up 3.5% on the year-earlier period.

“Though markets appeared to receive the GNU favourably and its announcement undeniably generated positive sentiment, concerns about economic growth, a struggling labour market, and the need for reforms persisted,” it said.

“Our ports remained a major obstacle, so we (like so many others) are carrying more goods in transit (GIT) inventory because of it, and this is compounded by disruptions in international shipping routes, our GIT days have increased accordingly,” it noted.

Eternity Technologies, the traction battery business Hudaco acquired in 2017 initially performed well, but after disappointing results in the past three years and some structural changes in its market, the group concluded that it would take longer than it had previously believed to get its performance to the level it should be. Accordingly, its goodwill had been impaired to the extent of R77m, but there was a reduction of R59m in the original purchase price, so the net loss was only R18m.

The group’s consumer-related products segment’s sales were down 12.3% and operating profit decreased 19.9% as consumer spending remained under pressure.

The 19 engineering consumables businesses contributed 54% of group sales and 57% of operating profit. The segment’s turnover increased by 0.6% and operating profit by 7.6%. This was mainly due to the acquisitions, which added R284m in turnover and R73m in operating profit. Brigit Fire and Plasti-Weld have been included in these results for the full year.

“We had good performances from our businesses supplying diesel engines, hydraulics and gear pumps, filtration, modular belting and thermoplastic pipes, fittings and equipment.

“Even though we are operating in volatile times, with significant potential risks arising from both international and local politics, we believe that Hudaco is well placed for a successful 2025,” it said.

“We remain optimistic that the improvement seen since October 2024 will continue.”

Progress at the ports and reduced load-shedding should have a positive effect on economic activity and losses incurred at Bosworth, Deltec and Eternity should not be repeated.

“The Brigit Fire and Plasti-Weld acquisitions have been very successful and should enhance value further this year. We are excited about the Isotec acquisition, which would be Hudaco’s largest to date and meets our strategic objective of making larger acquisitions that can move the needle”.

If all conditions are met, of which a satisfactory due diligence and Competition Commission approval are the most significant, it is likely to be included in Hudaco’s 2025 results for eight months.

mackenziej@arena.africa