Reunert Ltd (FRA:REU1) (H1 2025) Earnings Call Highlights: Navigating Challenges and Seizing ...
Release Date: May 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Reunert Ltd (FRA:REU1) maintained a strong balance sheet with significant banking facilities and positive cash generation capacity.
The solar energy business experienced good growth in profitability, contributing positively to the group's performance.
The defense cluster's growth projections continue to strengthen, with an increased order book and improved international strategic positioning.
The ICT segment delivered a solid set of results, with revenue increasing slightly and operating profit improving.
Reunert Ltd (FRA:REU1) has successfully merged Plus One X and IQ Business, creating a leading South African digital integration company.
The group's revenue from continuing operations decreased by 5%, and profit after tax decreased by 19% due to challenging macroeconomic conditions.
The applied electronics segment underperformed, with a significant revenue decline due to the deferment of a key fuse contract.
The battery storage market faced very weak conditions, leading to the sale of Blue Nova Energy and its classification as a discontinued operation.
The electrical engineering segment's operating profit declined by 6% due to a slow start to infrastructure investment in South Africa.
The group faced a net 69 million rand difference in non-recurring COVID-19 insurance payments between the two periods, impacting profitability.
Warning! GuruFocus has detected 5 Warning Sign with FRA:REU1.
Q: Can you provide clarity on the transmission grid and infrastructure projects and the confidence that they would commence in 2026? A: Alan Dixon, CEO: Significant legislative and regulatory improvements have been made to enable the transmission grid rollout. The National Transmission Company of South Africa (NTCSA) has been established to drive these projects. Bids for key components have been issued, and preferred suppliers have been identified. We have high confidence in receiving orders in 2026, though the rate and size of these orders remain to be seen.
Q: Has the IQ group met pre-acquisition expectations, and are further acquisitions a core objective? A: Alan Dixon, CEO: The IQ group has progressed well, meeting our hurdle rates despite slower growth due to the challenging macroeconomic environment. The merger with Plus One X has been successful, and the organization is well-positioned for future growth. Further acquisitions will be considered if they align with our strategic objectives and meet our criteria.
Q: What is the impact of US tariffs on the circuit breaker business? A: Alan Dixon, CEO: Currently, a 10% import duty is applied to circuit breakers exported from South Africa to the US. We are working to pass on these costs to customers and mitigate them through cost reductions. If tariffs increase to 30%, it would significantly impact both volume and margin.
Q: What is the demand outlook outside of South Africa for cables, particularly regarding the Lobito corridor? A: Alan Dixon, CEO: Demand in Africa, especially in Zambia and surrounding areas, is positive, driven by investments in copper infrastructure. The Lobito corridor's execution phase will bolster demand. We see healthy demand in Central Africa, supported by ongoing investments in copper mines.
Q: What are the areas for capital allocation, and what is your stance on buybacks? A: Alan Dixon, CEO: Capital allocation focuses on maintaining existing assets, strategic investments in renewable energy, internationalization, and ICT businesses, and dividends for shareholders. Buybacks are considered after evaluating organic and strategic investments and dividends, but current volatility makes immediate buybacks unlikely.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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