JSE-listed Hudaco Industries is “very pleased” with its financial results for the full-year ended November 30, 2024, with signs of improvement seen in the latter months following a poor first-half performance, and the mitigation of challenging conditions.

The South African group imports and distributes a range of branded automotive, industrial and electronic consumable products, mainly in the Southern African region.

Comparable earnings a share were 15% down at mid-year; however, the company recovered much of that deficit in the second half to end 6% behind for the full-year.

The company highlighted positives as the formation of the Government of National Unity and its market reception, while challenges include inadequate economic growth and port performance. The easing of loadshedding was also welcomed, but it did impact on the company’s energy business.

Yearly turnover ended down 5.8% at R8.4-billion, with operating profit down 6% at R1.01-billion.

The group operating profit margin was maintained at 12% owing to a 1.7% increase in gross margin percentage and tight control of expenses, which are down 1.7% on a like-for-like basis, with acquisitions excluded.

Traction battery business Eternity Technologies’ performance was below par, and its goodwill had been impaired to the extent of R77-million. However, there was a reduction of R59-million in the original purchase price, meaning the net loss was reduced to R18-million.

Headline and comparable earnings per share decreased by 6.3%.

Return on equity was 15.4% overall and 17.4% if the impairment of Eternity’s goodwill was excluded.

Cash generated from operations was a strong R1.5-billion.

The final dividend was left unchanged at R7, bringing the 2024 dividend to R10.25 a share, the same as in 2023.

Comparable earnings covered the total dividend 1.96 times, which was marginally outside Hudaco’s long-term dividend policy range of paying between 40% and 50% of comparable earnings, but was justified by the strong cash generation, the company pointed out.

Inventories at year-end of R2.46-billion have been reduced by R232-million over the year, with much of the reduction coming from good progress in the alternative energy businesses, which were heavily overstocked last year.

The consumer-related products segment consists of 12 businesses.

Last year, this segment contributed 50% of group sales and 50% of operating profit.  

Segment sales were down 12.3% at R3.9-billion, while the segment’s operating profit decreased 19.9% to R474-million.

Consumer spending was under pressure again this year.

In this segment, the wholesale and retail, and security sectors, declined last year, which negatively affected Hudaco’s businesses supplying products and services to these sectors, other than Automotive Aftermarket and Rutherford. Volume sales declined and gross margins were maintained.

The operating profit margin in this segment was 12.2%, down from 13.4%.

The 19 engineering consumables businesses contributed 54% of group sales and 57% of operating profit.

The segment’s turnover increased by 0.6% to R4.5-billion and operating profit by 7.6% to R625-million.

This was mainly owing to the acquisitions, which added R284-million in turnover and R73-million in operating profit.

In this segment, the agriculture, platinum mining, and manufacturing sectors declined last year, and the declines affected Hudaco’s businesses supplying products and services to these sectors.

Good performances came from businesses supplying diesel engines, hydraulics and gear pumps, filtration, modular belting and thermoplastic pipes, fittings and equipment.

The operating profit margin in this segment increased from 12.9% to 13.9%.

OUTLOOK
Despite volatility, Hudaco believes it is well placed for a successful year.

It is optimistic that the improvement seen since October 2024 will continue, and there is a reasonable prospect that interest rates will decline further, which augurs well for a recovery in its consumer-related product businesses.

Progress at the ports and reduced loadshedding should positively impact economic activity and losses incurred at Bosworth, Deltec and Eternity.

The Brigit Fire and Plasti-Weld acquisitions have been highlighted as successful and are expected to enhance value further this year.

Hudaco is bullish about the Isotec acquisition, which would be its largest to date.

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