ALTX-listed steel retailer Alert Steel said its initiatives to turn the company around have resulted in a marked improvement in performance.
But it also said supply constraints and a deteriorating operating environment were hampering its return to profitability.
CEO Johan du Toit said the effectiveness of the remedial measures was evident in the group’s results for the year ended June.
Headline loss per share dropped 91% to 4.3c a share, from a headline loss of 47.3c last year.
Alert Steel said it wanted to ensure long-term profitability by returning to its core business of steel retailing. However, Mr du Toit said on Wednesday that total steel production in South Africa plunged 22% in the 12 months to May.
This was mainly due to supply disruptions at the country’s major steel mills, while demand for steel and steel-related products had declined sharply on the lack of new contracts in the construction sector. These accounted for about 60% of South Africa’s overall demand for steel.
"As a result of these disruptions, stock supply was intermittent and this impacted on the year’s trading," Mr du Toit said.
"We also had to contend with two industry strikes during the year and cash flow constraints impacted our ability to pay suppliers within terms."
But he also said cash flow and product supply problems were resolved once funds from the group’s rights offer were advanced. He said the company had returned to normal trading in May.
The company’s biggest growth came from its Alert Express containers business, with 27 converted shipping containers having been deployed as mobile retail units.
These were located in growing rural markets, and were quick to deploy, cheap to operate and generated good profit margins, the company said.
"We expect these containers to be major revenue generators for the company going forward," Mr du Toit said.
The first three months of the new financial year saw continued trading challenges, which were not expected to improve for the rest of the year.
"In light of these conditions, we reviewed Alert Steel’s business plan and based our forecast of the company’s results to June (next year) on the assumption there will be no improvement in the operating environment," Mr du Toit said.
"However, even under this worst-case scenario, we expect to see an improvement on (this year’s) results."
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