JSE-listed building and construction materials group Sephaku Holdings expects the South African building materials market to remain subdued in 2020, following a difficult 2019 financial year, characterised by increased competition from blenders and cement imports.

Sephaku Image credit: Sephaku

Sephaku. Image credit: Sephaku

The company, which holds a 36% stake in Dangote Cement South Africa’s Sephaku Cement (SepCem) and owns ready-mixed concrete producer Métier outright, reported a 9.4% decrease in cement sales volumes last year.

SepCem’s revenue decreased to R2.18-billion last year from R2.29-billion in 2018, owing to the fall in volumes, while its profit after tax fell to R1.3-million compared with R128.7-million in 2018. The 2018 result had been buoyed, however, by a tax credit, without which the comparative profit after tax figure would have been R46.9-million.

In a statement to shareholders, Sephaku Holdings noted that cement imports had increased by 12% in 2019 but said that the cement industry’s application for a safeguard tariff from the International Trade Administration Commission of South Africa had progressed well. If successful, the application could result in the imposition of a non-country-specific flat tariff on all imported cement.

Meanwhile, Métier’s volumes slumped by 13.7% last year, a performance that Sephaku Holdings attributed to intense competition and a stagnant construction market. The subsidiary was implementing strategic cost-cutting measures on noncore assets following the implementation of R37.5-million rights offer, which was undertaken to stabilise Métier’s balance sheet.

“Overall, building materials demand will remain subdued as reflected by the 12.7% decline in building plans passed data for 2019 from Statistics SA,” the company noted, warning that building materials demand was likely to remain constrained for the next 12 to 18 months.

Source: Engineering News