Commenting on the period under review the Chief Executive of Powertech, Robbie Venter, said that as predicted in his outlook at year-end, the poor market conditions that prevailed in the previous year had continued and the group had experienced a difficult six months. "The low level activity in both the local telecommunications and building and construction sectors have persisted and pressure on margins resulted as manufacturers attempted to maintain production volumes. Notwithstanding the above, significant progress was made in meeting our strategic objectives and under the circumstances our operations have shown strong resilience." he said.
Powertech’s current results include the group's foreign operations, Dynamic Batteries UK and Alcobre Cables Portugal, which have been consolidated for the first time following the unbundling of the Altron Group's offshore assets. These operations were previously accounted for on an equity basis.
The group’s balance sheet remains strong with net cash resources of R164.1 million (R175,2 million).
During the period under review ABB Powertech Transformers acquired an additional 30 percent interest in Desta Power Matla, further consolidating the relationship with the empowerment organisation, Power Matla.
Subsequent to 31 August 2000, Powertech acquired a majority stake in a leading Spanish telecommunication and data cable manufacturer, Cables de Comunicaciones Zaragoza S.L, Spain. Commenting on the acquisition, Venter said the deal would further expand Powertech’s operations in line with its global strategy to serve telecommunications customers worldwide. "It also supports our strategy to reduce dependency on the local markets. The foreign operations and our export activities combined will now account for one third of our annual turnover."
He said that in the Telecommunications sector the downturn in fibre optic cable orders from the local market had led to an increased export drive, resulting in the group qualifying as a supplier to telecom operators in Europe, UK and Africa. "Numerous orders have already been secured from export customers including Corning, for the supply to British Telecom and Cable&Wireless, and others. The benefit of these will reflect in the second half of the year." He said the demand for metallic communication cables remained strong as new technologies, such as ISDN and ADSL, enhanced the capabilities of the existing copper networks. Lambda Cables, the data cable operation, continued to produce excellent results.
"The demand for solar systems has improved significantly over the second half of last year," said Venter. "Also, the supply of DC power systems into the wireless GSM market has benefited from systems upgrading and base station expansion undertaken by the mobile network providers."
Venter said in the Power Electronics sector ABB Powertech Transformers continued to perform very well, with capacity fully booked for the remainder of the year. Export orders for the US market formed a large percentage of the order book.
The power cable, electrical accessories and lighting businesses continued to experience difficult market conditions. "While turnover volume is in line with the comparable period, pressure on margins, largely due to the aggressive pricing strategies of competitors, affected the results negatively," said Venter.
Automotive and industrial batteries, whilst below expectation, performed well given the prevailing market conditions.
During the period under review Powertech repurchased almost three percent of its shares in issue for an average share price of 290 cents. "It is not intended, at this stage, to cancel any of the repurchased shares," said Venter.
"New appointments to Powertech’s board, Adv. Dali Mpofu and Mr Peter Wilmot, will add value to the group through their skills and experience," said Venter. Peter Wilmot will also be chairing the Powertech Audit Committee. The appointments follow the resignations of Mr Tony Trahar and Mr Richard McBride.
Looking ahead, Venter said he expected market conditions in the domestic economy to remain difficult. "However, economic indicators project an upturn in the building and construction industries which should provide some stimulation to the local economy. The number of building plans passed has increased recently and, once these translate into new building starts, Powertech is well positioned to benefit." He said recent export orders, particularly for fibre optic cables and power transformers, together with a more stable labour environment coupled with the growth expected from the offshore acquisition, placed Powertech in a strong position to counteract the negative domestic economy.
Venter said he remained optimistic. "Our operations are well positioned, ready and able to be major suppliers to the second fixed line operator and the third cellular network operator. The awarding of these licences will have positive effects on the domestic economy and should also provide a welcome stimulus for the Powertech operations. "
The JSE-listed Powertech group has an annual turnover of R2.5 billion and employs 6,900 people. More information on the Powertech group is available on the Internet at www.powertech.co.za
For additional information contact :
Robbie Venter – Chief Executive Powertech • Cell 082 891 1200 or
Regula Niehus – Communications Manager : Powertech.
Telephone 706-7184 or, Cell 083-442-6777.
Robbie Venter will be available for telephonic interviews on Wednesday, 4 October after 18h30.
