HUDACO Industries, which lifted its final dividend for the 2021 financial year by 85 percent to 760 cents compared with the year before, is buying well known South Africa gas company Cadac.
The dividend was also up by 26.7 percent compared with 2019, after the group’s automotive, industrial and electrical consumable products businesses recovered well following the effects of the pandemic, the results showed Friday.
Hudaco management said the effective date of the acquisition was likely to be during this month.
The purchase price was based on a multiple of the average adjusted taxed profit for the three years to September 30, 2020, 2021 and January 31, 2023, to a maximum of R100 million.
Cadac distributes gas-related products for cooking, heating, lighting and braaiing, including gas cylinders, stoves, heaters, cookers, skottels, braais, coolers and accessories.
“We are optimistic about Cadac, its growth potential. It is everything Hudaco looks for in an acquisition: a brand well known in South Africa, distributing an extensive range of high-quality products in the region, with good growth potential under Hudaco leadership,” the company said.
They were also excited about the newly established Hudaco Energy business and its impact on the diesel engine, battery and electrical businesses already supplying the sustainable energy market.
Meanwhile, group revenue increased 16.1 percent to R7.26 billion for the year to November 30, 2021, compared with R6.25bn in 2020 and it was 8.3 percent higher than in 2019.
Operating profit increased 61.9 percent to R826m compared with 2020 and by 17.9 percent when compared with 2019. Headline earnings a share of 1 641 cents was 56.3 percent higher than in 2020, and 21.1 percent higher than in 2019.
“2021 was a year where we had to be agile and adapt to ever-changing business conditions,” they said.
Hudaco lost two KwaZulu-Natal branches and had to close several businesses for the week of the civil unrest last July. Then in October, the three-week Numsa metal industries strike affected most of the engineering consumables businesses.
Load shedding was intermittent throughout the year. Supply chain constraints, internationally and locally, most of which started with Covid-19 lockdowns in 2020, became a persistent challenge. Many factories still face production backlogs, they said.
“Once we were allocated products by suppliers, finding shipping containers became the next hurdle, followed by challenges finding ships prepared to carry our cargo. Shipping lines are becoming reluctant to dock in Durban and endure docking and offloading delays and the ensuing congestion, for which our largest container port has become notorious,” they said.
Freight forwarders and suppliers took advantage of supply chain congestion and product shortages to increase prices. The cost of shipping a container had risen to more than tenfold the pre-Covid cost, Hudaco said.
“Fortunately, for most of our products, Hudaco has the pricing power to pass these increases on to our customers and thus protect our margins. The decision to increase stock early in the year by one month of sales stood us in good stead,” it said.
Net borrowings fell by R174m to R469m. Cash generated from operations was healthy at R910m. Some R69m was spent buying back shares.
Turnover from the consumer-related products segment was up 5.2 percent and operating profit increased 31.1 percent. The engineering consumables’ segment turnover increased 12.2 percent and its operating profit by 28.9 percent.
There was strong growth in the mining, manufacturing, agriculture and wholesale and retail sectors.
Declines came from the security and export sectors. The consumer-related products segment comprises 11 businesses which in 2021, made up 52 percent of Hudaco’s sales and 60 percent of operating profit.
“Partquip and Rutherford were the outstanding performers, whilst our security division was again the poor performer.” The 18 engineering consumables businesses made up the other 48 percent of group sales and 40 percent of operating profit.
Ambro Steel, Bearings International, Powermite, Hudaco Power Transmissions and Gear Pump Manufacturing performed well. HERS, Bosworth and Joseph Grieveson delivered disappointing results, they said.
Hudaco’s share price closed 2.72 percent higher at R50.49 on the JSE on Friday.
BUSINESS REPORT ONLINE