Italtile profit falls as weak demand squeezes margins

Italtile’s profit fell in the year to June as weaker consumer demand, rising input costs and strong competition squeezed margins.

The tile, bathroomware and home finishing products group reported a 0.6% increase in system-wide turnover to R11.3bn for the year ended June.

Trading profit fell 10.4% to R1.8bn, while HEPS were down 9.4% to 113.4c, the group said on Monday.

Despite this, the board declared a final dividend of 21c a share, taking the total dividend for the year to 45c, down from 50c in the previous year.

It also declared a special dividend of 25c a share, which was supported by cash reserves in excess of operational requirements. In the previous financial year, the group paid a special dividend of 98c.

The company said the weaker performance was driven by continued pressure across the group, particularly in its ceramics business, where excess manufacturing capacity in Southern Africa weighed on sales and margins.

Ceramic Industries’ sales fell 1.1% for the year, with profitability also affected by higher costs.

Italtile said weaker demand, rising input costs and strong competition had placed significant pressure on margins across the group. While cost discipline and operational efficiencies helped contain some of the pressure, these gains were insufficient to offset underlying cost increases.

The retail business was more resilient, with revenue increasing 0.4% to R7.7bn. Average selling price inflation was 1.8%, while retail margins improved by 0.5% as the group improved its shop operations.

The company said its online shops recorded higher traffic and sales, supported by digital content and a more personalised sales experience.

The group’s import and supply chain businesses were weaker, with revenue falling 6.4%. However, improved margins helped these businesses absorb higher fuel costs.

Italtile ended the year with R1.7bn in net cash, down 21% from a year earlier.

The group invested R443m in capital expenditure, spent R201m on share buybacks and paid R1.8bn in dividends during the year.

The company expects trading conditions to remain difficult over the next year, citing South Africa’s weaker economic outlook, the impact of the Middle East conflict on costs and consumer confidence, and caution before the local government elections.