Building boom gives materials suppliers room to prosper

Posted On Tuesday, 15 February 2005 02:00 Published by eProp Commercial Property News
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THE building market is showing no signs of slowing down.

Construction IndustryTHE building market is showing no signs of slowing down, with building materials retailers feeling the full effects of the buoyant building sector.

Building materials chain Cashbuild said revenue was up 33% for the second quarter of the year. Ceramic tile retailer Italtile’s revenue rose 28,7% to R996,8m and trading profit increased 28% to R120,2m for the half year to end December.

Construction materials merchant Distribution & Warehousing Network’s (Dawn’s) turnover from continuing operations rose 35% to R662m, and operating profit from continuing operations surged 65% to R53,2m from R32,2m.

The environment of low interest rates has seen the building industry’s confidence rise to levels last seen in the economic upswing of 1978 to 1981, the Bureau for Economic Research (BER) said recently.

The BER said it found business-confidence levels of residential building contractors in the fourth quarter of last year to be 96% — compared with 87% in the third quarter of last year and 48% in the second quarter of 2003.

The confidence in the building sector has seen larger retail chains increase their presence in the market by taking over small, independent chains.

Dawn bought tap maker Cobra Watertech, and building material chain Iliad Africa took over D&A Timbers and Buildcorp. General goods retailer Massmart bought Builders Warehouse and Tile Warehouse about two years ago.

Building material retailers were also the first in the retail sector to close empowerment deals, with Cashbuild and Iliad Africa by bringing in black shareholders.

Dawn’s empowerment partner, Ukhamba has a 38,3% holding in the materials merchant.

Dawn CEO Derek Tod said he did not see a slowdown in growth in the market, because the economy has seen a "major unlocking" of the consumer market.

Tod is not the only player in the industry confident about its outlook. Italtile chief financial officer Peter Swatton said last week that there were "more people with more money" in SA.

He said the market’s growth might flatten, but he did not expect it to drop. Italtile plans to open about 30-40 new outlets locally over the next five years.

Cashbuild opened four new stores in the first half of its financial year, relocated one and refurbished another. Five stores are in the process of being reburbished.

The company said the expected improvement in its results was due to it selling more products, and enjoying better margins. Revenue growth in the first two weeks of January continued the trend shown in the second quarter and Cashbuild said it had "every expectation" that these growth levels would carry on.

 

Last modified on Saturday, 19 October 2013 15:33

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