Hudaco buys gas products brand Cadac, reports strong results

The importer has announced that it looks to buy the South African company for R100m.
Image: Supplied

JSE-listed importer Hudaco Industries, following the reporting of a strong full-year performance for the year ended November 2021, says it has signed agreements to buy well-known braaiing, gas and electronic appliances brand Cadac for about R100 million.

Speaking at the group’s results presentation on Friday, CEO Graham Dunford says this acquisition of Cadac presents Hudaco with great growth opportunities in the renewable energy space, especially in light of the country’s power generation woes.

“We believe that there’s a good opportunity for growth for us, we see that these products are what’s needed in South Africa with our electricity supply problems and in the rural areas,” Dunford says.

Cadac is a South African brand known for its wide range of gas-related products for cooking, heating, lighting and braaiing as well as gas cylinders, stoves and heaters.

“We are really excited about this product. This is everything that Hudaco wants to be and where Hudaco is. It’s a good quality branded product, it’s a household name … We are really excited about what Cadac is going to bring to Hudaco,” he adds.

Strong margins and record dividend

A good performance in its manufacturing, mining and wholesale and retail sectors anchored the group’s strong balance sheet, despite the challenges it saw with intermittent Covid-19 waves of infections, the July riots, a three-week metal industries strike and load shedding.

The group – which imports branded industrial, electronic and electrical products from international and local manufacturers – reported an increase in its final dividend to 520 cents per share, bringing its total dividend for the year to 760 cents, up by 27% on 2019, making this a record distribution for the company.

It also saw an increase of 21% in headline earnings per share (Heps) for the period to 1 641 cents against its 2019 full year results, while total turnover rose by 8.3% to R7.25 billion in 2021 when compared to 2019.

The group says a comparison of its 2021 performance to that of 2019 provides a more relevant yardstick of its performance, given that the 2020 year was so devastatingly impacted by Covid-19 lockdowns.

Operating profits rose by 18% to R826 million on 2019, generated cash was up to R910 million and the group also managed to slash of its net borrowings by R174 million to R469 million for the reporting period.

Hudaco says it is confident that its buying and pricing power will protect its margins and ensure the company’s continued growth.

“I do hope that we can continue with that [strong operating margin], I don’t see any reason why not because we have great brands and great industries,” Dunford says.

Read: Hudaco group is flying

“I think that for a lot of our customers, [they] can buy cheaper any time… but overall [they] want something that’s good quality and reasonably priced and that’s what we have.

“So, I do believe that our growth margin is sustainable, and we will even try to get it up this year if we can,” he adds.

Room for improvement

Even considering its successes, the group did see declines in its security and export sectors.

The group noted that its security and communications business performed poorly in the period but says it is confident that the division’s new management team will turn it around.

“In the consumer-related products segment, we expect to see synergies and benefits from the security and communications businesses, with the new management team in place,” the group says.

Further, supply chain constraints still present major hurdles for businesses in the export market. Closer to home, the company CEO expressed frustrations with the inefficiencies being reported at the Durban port which have resulted in costly delays for many in the sector.

Dunford says that privatising the Durban port is the best way to remedy the situation.

“I think anything run by the government is useless.”

“I also think that when you employ people because you want to put a ‘pal’ in place, instead of someone who knows what they’re doing, you’re going to get these kinds of results,” Dunford says.

“So until they get good qualified people in the right place – and it’s not just the ports I think in just about everywhere in the country. We need to have qualified people running the jobs that they are supposed to be doing. That’s the only way we are going to fix this,” he adds

Adding that until the issues at the Durban port are fixed, the company has opted to make use of alternative ports whenever possible.

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“I think anything run by the government is useless.” ….. and so say all of as, (chorus) and so say all of us!

Hopefully the money will enure to the benefit of the Cadac pensioners given that the Cadac Pension Fund has a significant preference shareholding.

End of comments.

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