| Wed 28 May 2003, 9:09 | | Nu-World gears up for tough US export rivals |
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Industrial Reporter
NU-WORLD expects its exports to the US to come under pressure in the second half of the year as a result of the rand's strength.
While the appliance manufacturer and distributor saw exports rise on the back of a contract to supply a leading retailer in the US in the past year, it conceded it would be difficult to remain competitive because of the rand's performance.
To remain competitive, NuWorld chairman Michael Goldberg said the group was now working on improving the range of products it sold in the US.
Goldberg said it was hard to vie with Chinese manufacturers on low-end products in the US. He echoed the sentiment of one of his group's competitors in this country, in emphasising that SA manufacturers had to compete by making better quality products, rather than just on price, in world markets.
In presenting Nu-World's interim results for the six months to February, finance director Graham Hindle said the figures did not reflect a downturn in exports as the US contracts only kicked in in the second half of the past year.
Aside from exports to the US coming under pressure, its rival Amalgamated Appliances (Amap) seemed have stepped up its efforts in the domestic market.
Abvest small cap analyst Shawn Stockek said while Nu-World's brands had a good standing in the market, Amap's brands seemed to be "more fashionable".
Hindle said Nu-World did not lose market share but did not grow it as fast as one of its leading rivals.
Turnover for Nu-World rose 42% to R655,9m, while operating profit was up 41,6% to R29,8m.
The group grew attributable income 13,1% to R19,33m and increased headline earnings a share 14,8% to 90,4c.
Stockek described the results as "respectable" with a "great" turn- over. But he said the operating margin looked to be "under pressure".
Goldberg said the rise in revenue resulted in the main from the increased holding in its Australian operation, Prima Australasia, coming through for the first time.
Goldberg said the group was considering another foreign acquisition, as it would ease distribution of its products in overseas markets.
Goldberg expected further consolidation in the appliance distribution sector, as he did not think recent Massmart and Edcon acquisitions in this sector were the last.
He said Nu-World was also moving into the furniture market. It went into it after retailers started asking for TV stands, to complement the range of TVs distributed.
Selling air conditioners has also been a lucrative earnings source for the group. Goldberg said air conditioners had become more popular now that they were more affordable.
Looking forward, Nu-World was confident there would be an upturn in the domestic market with at least one percentage point drop in interest rates coming this year.
Aside from an expected fall in interest rates, government's pledge to electrify more than 250000 homes also boosted the group's prospects.
Nu-World closed 5% higher, at R10,50, with 26500 shares traded in 29 transactions.
May 28 2003 07:11:12:000AM Larry Claasen Business Day 1st Edition
Wednesday
28 May 2003
