CFO Nick Thomson says Reunert continues to have a strong, un-geared balance sheet

Reunert has reported a significant recovery of its results due to its electrical engineering segment.

Reunert has seen a significant recovery of its results for the six months ended March 2021 compared to the comparative period in 2020. The group reported a revenue of R4.614 billion for the period, as well as an operating profit of R436 million.

CFO Nick Thomson credits the increase in revenue to the recovery of its electrical engineering segment as its circuit breaker business expanded both its local and export markets. Reunert’s local power cable business had a full period of production compared to the previous year, where it lost substantial production to industrial action.

The group, which is made up of many diverse businesses operating across different sectors of the economy, saw its segmental operating profit before impairment of financial assets increase by 14 percent to R448 million.

However, the group said in a statement that while they are seeing a recovery of operating profit to pre-Covid-19 levels, their results continue to be adversely affected by the reduced economic activity associated with the pandemic.

“Our applied electronics segment earns a substantial portion of its revenue from exports. Due to the nature of these exports, the local and export country lockdowns have made it more difficult to deliver into, secure and manage these export contracts,” Nick says. “For example, if we are required to commission a product in an export country, travel restrictions due to Covid-19 can lead to delays in meeting this requirement. Likewise negotiating and concluding contracts often requires face-to-face interaction in the customer’s own country, which is subject to Covid-19 lockdowns in that country.”

He explains that what has been really gratifying is how all the Reunert employees have pulled together through the pandemic to make the most of the difficult economic conditions. “The primary focus has been on delivering to our customers while at the same time ensuring the best possible adherence to all the Covid-19 protocols in the workplace. This has required great resilience, as our employees have dealt with the impact of Covid-19 in their communities and on their families and friends, as well as the increased complexities at work the pandemic has brought such as more difficult and expensive logistics or reduced availability of raw materials or learning to interact effectively with customers remotely.”

Looking ahead
Nick says that Reunert is fortunate to continue to have a strong, un-geared balance sheet, which positions it well to both navigate the current economic weaknesses that have been amplified by Covid-19 and to continue to invest to meet the company’s strategic objectives.

With the third wave of the pandemic now in South Africa, Nick says that Reunert continues to plan and execute based on being in extraordinary times. “We have seen a recovery in business to around 80 percent of pre-Covid-19 levels of activity and expect that this will continue to improve in line with the recovery of GDP and business confidence over the next several years,” he adds.

Unlike in 2020, Nick says that the improved conditions have meant that the company has not had to increase any of its expected credit loss allowances or to impair any of the group’s goodwill or property plant and equipment.

He adds that Reunert continues to deploy capital where they see opportunity for growth. “A particular example would be our expectations of increased demand for renewable energy, where we have recently announced our plan to form a joint venture with AP Møller Capital to unlock opportunities to develop renewable energy solutions both in South Africa and in other African countries.”