Italtile (ITE) reported weaker results in FY24, highlighting the tough consumer environment which has dampened demand for home improvement products, and increasing competition leading to aggressive price ladders, particularly in the tile market. Although 2H24 was much improved compared to the first half, lower volume production and capacity underutilisation within the Manufacturing segment drove down group margins. Management was able to push efficiencies across the business, resulting in flat operating costs.
Retail turnover from external customers declined by 4.0% y-y, with like-for-like sales and volumes down 2% y-y, reflecting weaker demand within the industry. This segment was particularly stressed by tile deflation as retailers were competing for market share.
Turnover from external customers in the Manufacturing segment improved by 3.8% y-y, but intersegment turnover fell 21.3%. This represents a significant decline in demand for manufacturing products in the group’s Retail and Supply and Support segments. This resulted in inefficiencies and unit costs increasing, which negatively affected profitability.
The Integrated Supply chain business boosted turnover by 4.1% y-y. With container prices having risen during the period, ITE had to pass on price increases to cover costs as selling price inflation landed at 3.7%.
Some positive news regarding the LNG Day Zero scenario is that Sasol has extended the deadline to 2027 before it pauses imports from Mozambique via the Rompco pipeline. This provides industry gas users like ITE some headroom to plan for alternative energy. ITE has proposed trialling coal-to-gas by converting a kiln at the Gryphon factory. The cost of conversion is c. R70 million.