Increased Competition Decreases Cashbuild’s Revenue

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VENTURES AFRICA- Cashbuild, South Africa’s building materials supplier, on Wednesday said revenues for the six months to December gained only 1 percent without disclosing any reason for the lacklustre performance during trading update, saying it was in the process of preparing its interim results.

The development depressed share price as the stock lost more than 5 percent in early trade on the JSE to 13990 rands from 14840 rands.

Analysts said the market could have been caught by surprise as they thought the company was doing well in terms of sales despite an increase in competition in South Africa.

Throughout the country, townships – areas zoned for black people and meant to keep them poor by the apartheid system – have seen a boom in the renovation and building of houses.

“This lacklustre performance could mean that Cashbuild has to deal with tough competition. It is true that renovations and house constructions have surged in the townships. But why are Cashbuild’s revenues so low? Where are people from the townships buying their building materials?

In South Africa, competition for this company has emerged with the coming into the market of companies like Build It, Builders Warehouse and many others.

Cashbuild said transactions through the tills during the 2nd quarter and half year remained at similar levels to those of the comparative periods.

It said total units sold decreased by 5 percent, with existing stores’ units decreasing by 7 percent. Half year units sold decreased by 2 percent on prior half year, with existing stores’ units decreasing by 4 percent.

The company said operational profits during the period had declined from those reported in the second half of the prior financial year.
The company did not give reasons for the poor performance, saying it could not comment on these as it was in a closed period – a period when they are preparing results and are not allowed by law to discuss them.

Cashbuild is the largest retailer of building materials and associated products, selling directly to cash-paying customers through its 193 (and growing) stores in South Africa, Namibia, Lesotho, Botswana, Swaziland and Malawi. Cashbuild which employs in excess of 4 000 people, comprises Cashbuild Limited and the operating subsidiaries registered in countries where it retails.