- ICT and electronics giant Reunert reported an interim profit fall of more than a fifth on Friday.
- Weak demand from lacklustre infrastructure spending in SA and Zambia has weighed on the group, as have US tariffs.
- While the company is concerned about a volatile world, it is also eyeing better demand in its second half in Zambia, while its defence order book remains strong.
- For more financial news, visit News24 Business.
Shares of Reunert, one of the largest and oldest industrial companies in South Africa, recovered slightly on Friday after it reported that it eked out interim revenue growth despite weak demand for power cables.
The group had warned of a continuing profit fall of up to a quarter in a trading update last week that prompted a double-digit crash in its share price, and said on Friday that the profit measure of headline earnings per share declined 22% in its six months to end-March. This was slightly below the midpoint of its guidance range of 20% to 25% for this measure.
READ | Electronics group Reunert crashes 12% amid SA cable pain
Group revenue rose 1% to about R6.4 billion, while operating profit fell by 23% to R453 million. The group still almost quintupled its net cash pile to R383 million and kept its dividend steady at 90c per share, a total payout of about R164 million.
The marginal rise in revenue was driven by strong circuit breaker export volumes in the electrical engineering segment, and “disciplined execution” on a healthy order book, which contributed to the excellent defence cluster performance during the period, it said.
Reunert was founded in 1888 and listed on the JSE in 1948. It employs almost 6 500 people, with a diversified portfolio across electrical engineering, ICT and defence. ICT accounted for about 30% group revenue in its first half, electrical engineering (cables and circuit breakers) about 55%, and applied electronics (defence and renewable energy), such as fuzes and radar systems, 16%.
The majority of its operations are located in SA, with others in Australia, India, Lesotho, Mauritius, the US and Zambia. Reunert also accesses several export markets in Europe and Asia through distributors.
READ | Reunert ups dividend as it reports record demand for defence products
Alternating shocks
Operating profit in applied electronics jumped 41% to R110 million, with the group reporting solid performance and multi-year order books, with growth in businesses such as secured communications.
But, operating profit in its electrical engineering segment fell by 40% to R138 million.
Charl de Villiers, head of equities at Ashburton Investments, said this was a negative surprise from the result, which could be called the “good, the boring and the ugly” given that the ICT performance (4% revenue fall) wasn’t bad considering the SA context.
“Given the structural reforms, the sentiment around the electrical engineering segment was improving,” De Villiers said.
Reunert said it had “excellent export growth” in circuit breakers, specifically to the US, but tariffs and a stronger rand squeezed margins.
In the SA power cable business, orders were delayed, mainly around the recapitalisation of the transmission grid and low volumes from local municipalities, it said.
High-voltage cable volumes remained at a low level compared with the prior comparative period, while medium- and low-voltage cable volumes decreased by 14% and 20%, respectively.
This is evident in the South African gross domestic fixed investment falling to its lowest level in 25 years, at 14% of gross domestic product, as the South African government’s stated commitment to infrastructure investment did not translate into tangible activity in the period.
— Reunert
Higher maintenance services and focused cost containment measures, including reduced overtime, partly offset the loss from lower volumes in the South African power cable business, it said.
In Zambia, the kwacha strengthened by an average 21% against the dollar, hitting margins, while demand for copper products was dampened by a severe 31% increase in copper prices.
This caused a delay in order placement by customers and offtake from Zesco, the Zambian power utility, continued to be subdued.
Outlook
Reunert said in its outlook that it expects the “dynamic global geopolitical environment” will continue to weigh on it.
“The group continues to rely on the quality and strength of its experienced management teams and employees to navigate challenges, as they have successfully done previously,” it said.
The electrical engineering segment is expected to improve on the financial performance achieved in the first half of the year. This outlook is supported by a robust order book across both the circuit breaker and Zambian power cable businesses.
The defence cluster is expected to continue with its strong operational performance, but a stronger rand could weigh on profits, while the group expects an improved performance from an ICT business that underwent restructuring in the second half of 2025 and has also developed new revenue streams in areas like AI and cloud computing.
Reunert shares were up about 3% at R65 on Friday afternoon, still down 8.5% from when it released its trading update. This values the group at about R12 billion on the JSE. The shares have gained 9% on a one-year basis.
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