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[August 2008]
Maiden Results from African Brick
The Directors of African Brick Centre in South Africa have announced the group’s maiden results as a listed entity for the year ended 29 February 2008. African Brick Centre listed on 8 October 2007 on the Alternative Exchange of the JSE Ltd. On 1 March 2007, African Brick Centre obtained effective control and the power to govern the financial and operating policies of African Brick (Pty) Ltd, African Brick Lenasia (Pty) Ltd and Landton Properties (Pty) Ltd. As a result, the aforementioned subsidiaries’ results have been consolidated with effect from 1 March 2007 with the results of African Brick Centre Ltd.Management explained that African Brick (Pty) Ltd and African Brick Lenasia (Pty) Ltd are both involved in the manufacturing of clay bricks. These two factories currently have a combined production yield in excess of 90 million clay bricks per annum. The vast majority of outputs from the manufacturing operations are sold to the retailing arm of African Brick Centre, at market related wholesale prices. Landton Properties operates as a property investment company. The entity also owns the premises at which African Brick’s production facilities are based.
Revenue for the period under review increased by R20.1 million (21%) compared with the pro-forma aggregated revenue for the period ended 28 February 2007, as reported in the Prospectus of African Brick Centre dated 2 October 2007. EBITDA amounted to R30.8 million, an increase of R5.9 million (23.7%) compared to the pro-forma aggregated results for the period ended 28 February 2007.
The group said it should be noted that it did not achieve its forecast profit per the Prospectus as a result of adverse market conditions. This can be attributed to the influence of the interest rate hikes as well as the uncertainty of electricity supply which had a negative effect on the market. Due to the oversupply of bricks in the market a price increase was decided against, despite rising overheads and manufacturing costs.
Cash of R33.1 million was generated by operations of which R29.1 million was used to fund growth in working capital. Capital expenditure of R9.3 million was incurred during the 12 months under review, indicative of the group’s investment in infrastructure to position itself as a market leader in the brick manufacturing industry.
During the period under review, the group acquired a manufacturing facility situated in the Eastern Cape. This acquisition was considered a strategic move due to a shortage in plaster clay brick in that geographical region. Continuing capital expenditure is being incurred to update and modernise the newly acquired facilities in order to increase production capacity.
The group reported that it had decided not to pursue the Syferfontein project as stated in the Prospectus due to an inability to secure electricity supply to this facility. The acquisition of the above mentioned manufacturing facility in the Eastern Cape is considered to be more advantageous at this stage, with the full benefit of the acquisition being reflected in the 2009 financial year. The existing manufacturing facilities experienced under-production during January and February 2008, as a result of adverse weather conditions and interruptions in electricity supply.
In light of the prevailing high interest rate environment, activity in the building industry has slowed down significantly. This has put a lot of pressure on all suppliers of building materials. The group said it found itself in a fortunate position in that it primarily deals with the smaller builders, the DIY and general home improvement markets. As a result of the aforementioned, the revenue and profit projections, although under pressure, still remain stable. Growth is expected to flow from the existing retail infrastructure and improvements made in the efficiencies of the manufacturing operations.
Given the strong balance sheet and current cash resources, selective acquisition opportunities may also present themselves.
The capital expenditure programme in place will extend capacity, resulting in economies of scale and reduced production costs per unit, enabling African Brick to retain its competitive pricing structure. Due to the decades of experience vested in management, the group said it was confident that the current adverse market conditions would be managed appropriately.
www.africanbrick.co.za
ENDS