BSI breaks R1 bln turnover

2008-11-24 00:00

Pietermaritzburg steel group BSI (SA) yesterday posted a 177% rise in headline earnings per share (HEPS) for the six months to September 30, but remained cautious regarding the three-to-six month outlook amid waning demand for steel and a rapid decline in global prices.

Interim results revealed that the AltX-listed group broke the R1 billion turnover mark (R1,14 billion) during the period as revenue increased by 79%.

Joint CEO William Battershill told The Witness yesterday that the increase in turnover is largely as a result of higher volumes and higher international steel prices, which drove up local prices.

“We have done extremely well. The market was good [and] the shortage of steel stimulated demand. We also introduced new products. We introduced structural steel and steel plates. We were able to increase our market share.”

However, he warned: “The price drop [of steel] and lower volumes put a damper on that [the outlook]. We’ve seen a 25% drop [in the local price] in three months. Our challenge is to get our stocks, our inventories down as this will put pressure on margins. November, December and January will be three tough months.”

Although BSI increased its margins significantly during the interim reporting period, from 16,6% to 24,6%, Battershill expects margins to “come off” during the second interim period.

Battershill noted that the weakened rand helped soften the blow of the decline in global steel prices.

“We do not anticipate further steel price decreases into 2009 based on current international pricing trends (which are being stabilised by worldwide mill production cuts of up to 35%) and the weak rand, but if the world slips into recession, prices could fall even further.”

Attributable earnings for the six months grew 223% to R127,5 million. Battershill said cost control and expense containment will be a key focus area going forward.

BSI’s South African-based operations, excluding exports, outperformed the industry in terms of volumes over a nine-month period (January to September 2008).

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