Italtile, the home improvement and building materials retailer, distributor, and manufacturer, yesterday said it continued to trade in an environment of deflationary pricing and margin pressure in the five months to November 30, and sales growth was slim.
There was increased retail competition, and many retailers, wholesalers, and manufacturers remained over-stocked, the group said in a sales update yesterday.
Many commentators believe the formation of the Government of National Unity, fuel price cuts, lower inflation, lower interest rates, and the Two Pot pension payouts have improved the financial lot of many consumers.
However, the group said: “Although there are early signs of green shoots, the sustainability of this trend has yet to be proved.”
“The economic stimulus afforded by these developments will take time to filter through and significantly improve demand and spending.”
In addition, the long-standing building cycle downturn had substantial ground to recover.
In the first half of the review period, the group had experienced subdued consumer confidence and spending in the building and construction sector, with restricted discretionary spending, which impacted the affordability of renovation and new build projects.
In the tile manufacturing segment during the five-month period, there had been no easing in the over-capacity in the industry.
Consequently, competition in both retail and manufacturing remained intense, as the vast imbalance between excess tile supply and weak consumer demand persisted.
System-wide retail turnover reported by the group brands, CTM, Italtile Retail, and TopT, rose by 2.2% for the five months compared to the prior period.
The integrated import supply chain businesses also grew sales, aligned with the stronger sales achieved by the retail division, as well as the benefits of enhanced inventory management.
Combined manufacturing sales reported by Ceramic Industries and Ezee Tile Adhesive Manufacturers, to both group and third-party customers, declined by 1.6% compared to the prior period's decline of 5.9%.
“While capacity utilisation improved at Ceramic Industries, positively impacting on the cost base, margins remain under pressure in light of predatory pricing in the market,” the group said.
Notwithstanding current conditions, management said they were “cautiously optimistic that the retail division will continue to benefit from improved consumer sentiment and increased disposable income.”
However, the structural changes in the tile manufacturing landscape were expected to remain challenging for Ceramic Industries' tile operations, impacting its ability to optimise capacity utilisation and grow profitability.
“The group’s unwavering goal is to provide an unrivalled shopping experience for customers…management’s focus will remain on the growth drivers within its control and influence, namely to deliver retail excellence through our passionate teams, iconic brands, industry-leading technology, and differentiated products, and the competitive advantage of a vertically integrated supply chain,” Italtile’s management said.
The interim results are expected to be published on March 3, 2025.
Italtile’s share price nudged up 0.84% to R14.38 on the JSE yesterday morning, and the price has already increased by 26.7% since July 1, 2024.
In its 2024 financial year to end-June, a year during which system-side turnover was flat at R11.5 billion, and headline earnings per share fell slightly, the group declared a 78 cents per share special dividend to bring the total payout to 127 cents versus 53 cents the previous year.
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