Reunert profit surges with big defence and renewable energy growth
JSE-listed industrial group Reunert announced a significant increase in revenue and operating profit in its latest financial year ending September 2023.
Reunert Group CEO Alan Dickson said that the company’s three strategic growth initiatives proceeded on track in the past year.
These are expanding its ICT Segment’s capabilities, investment into its renewable energy ecosystem, and increasing non-South African revenue streams.
“Our international revenues grew materially this year as a more stable political and business environment in Zambia, and our record defence exports, delivered a significant growth in revenue,” Dickson said.
“Importantly, we enter 2024 with record orders on hand.”
The company recorded a 24% jump in revenue from R11.1 billion in 2022 to R13.8 billion in 2023.
Its segmental operating profit also increased by 28% — from R1.1 billion to R1.5 billion — while attributable profit was up 11% from R827 million to R919 million.
Headline earnings per share increased by 16% from 519 cents in 2022 to 602 cents in 2023, while the dividend per share increased from 224 cents to 249 cents.
Reunert said its growth was driven by its Electrical Engineering and Applied Electronics segments, which recorded strong operational performances on the back of improved demand for their products and services.
Under the Electrical Engineering segment, its power cable and circuit breaker businesses delivered solid results, and revenue increased by 14% to R7.2 billion, while operating profit increased by 27% to R552 million.
“The volumes in the power cable business increased, and the product mixes improved in both Zambia and South Africa,” Reunert said.
“The combined effect of higher factory loading, improved operational efficiencies, and a better product mix led to improved margins.”
“The circuit breaker business generated good product sales in South Africa and in most of their export markets.”
“The solid overall volumes were augmented by an improved margin performance as supply chain costs eased and the impact of the price increases of the prior year were realised.”
Big defence and renewable energy growth
The Applied Electronics segment had an excellent year as its defence revenue reached a multi-year high, and the demand for the segment’s renewable energy products and solutions remained positive.
This segment’s revenue increased by a whopping 51% from R2.4 billion to R3.6 billion.
This resulted in operating profit increasing 163% to R432 million from R164 million).
“The management teams performed well and delivered an excellent operational performance as they created operational leverage and delivered strong year-on-year improvement in financial performances at the Radar, Fuze and Encryption businesses,” Reunert said.
“This was bolstered further by the results of Etion Create, which was acquired with effect from 1 October 2022 and materially contributed to both the segment’s revenue and growth.”
Etion Create Office
In the renewable energy division, Reunert’s revenues grew by 24% to reach R1.1 billion due to record levels of load-shedding driving the sales of residual and small commercial batteries, as well as the private sector’s investment into solar energy.
“The expansion of the market has led to an increase in competition, both in terms of an increase in the number of competitor products but also in the pursuit of the skilled human resources required to operate the businesses,” Reunert said.
“The solar company has invested into the human resources and systems needed to drive our strategic aspirations on the ownership of solar BOO [build-own-operate] assets.”
Reunert’s solar company now owns 57MW of operating, work-in-progress and near financial-close assets.
The flip side of load-shedding
Ironically, load-shedding also had a negative impact on Reunert’s ICT segment, which resulted in limited profit growth of 2% to R644 million, despite the segment’s revenue increasing by 18% to R3.1 billion.
The financial performance of the ICT Segment was negatively affected by load-shedding, which reduced the minutes sold by Reunert’s Electronic Communications Network by 17%.
In addition, Reunert sold R250 million of the Quince loan book to fund the acquisition of Etion Create, while the South African Post Office’s business rescue also contributed to reduce operating profit.
Fortunately, Reunert’s +OneX performed well and accelerated its digital integration solutions income.
Skywire also leveraged its national broadband connectivity network to deliver year-on-year operating profit performances.
The growth in the segment was also attributed to Nashua’s “robust” print offering and complementary sales.
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