BUILDING material retail company Iliad Africa says mounting fuel costs are unlikely to ease pressure on operating profit soon.

The company said yesterday that earnings per share rose 9% to 76,9c in the six months to June 30. Turnover increased 14% to R2,2bn, with 5% of this increase attributable to the integration of recent acquisitions National Tile Traders and B-One.

Iliad said operating profit rose 9% as a result of significant increases in distribution expenses.

Fuel price hikes of about 75% accounted for the bulk of the extra cost. “In the absence of a significant drop in fuel prices, we do not anticipate being able to reduce the distribution costs in the short term.”

According to the company, the slowing activity was particularly evident in the residential market.

“The start of several new housing developments has been postponed due to the current state of the market, the effects of the National Credit Act, concerns about power supplies and the slow pace of regulatory approvals.”

Furthermore, the nonresidential market, which until now had countered slowing activity in the residential market, had started to come under pressure. The market for additions and alternations had also slowed.

According to Iliad, its general building materials division recorded solid results, capitalising on its established presence in secondary towns and “management’s superior ability to leverage trading skills by servicing a wider geographic area around each outlet”.

Iliad’s general building materials division store network expanded with the opening of an outlet in Lydenburg, Mpumalanga. “Site negotiations are under way for several stores in other growth areas.”

For its part, the specialised building materials division produced a muted performance. The penetration of the nonresidential market had offset the drop-off on the residential side.

Margins were also under severe pressure in this project based market. “As expected, the wholesale cluster continued on its growth path, despite the market slowdown.”

Iliad said it had entered the second half of the financial year on a sound footing. “Major focus on operating efficiencies, cost controls and group procurement will ensure effects of the downward pressures on demand will be offset.”