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Italtile, a prominent South African retailer and manufacturer specializing in bathroom and home products, and substantially controlled by the influential Giovanni Ravazzotti family, anticipates a potential decline of up to 16 percent in its headline earnings for the fiscal year concluding in June. This projection arises from diminished consumer spending attributed to heightened interest rates.
In a voluntary trading update issued on Monday, the company cited multiple factors contributing to this outlook. The weakening South African rand has resulted in augmented costs for imported goods, while persistently elevated inflation rates and unemployment levels exert added strain on homeowners.
Italtile, which is listed on the Johannesburg Stock Exchange and encompasses well-known brands such as Italtile Retail, CTM, TopT, and U-Light, holds the status of a bellwether for gauging consumer expenditure health. Analysts assert that this trading update serves as a significant indicator of the financial challenges encountered by middle-income South Africans.
Despite implementing a 6.7-percent increase in selling prices, Italtile reported a net sales decrease across its brands, with like-for-like retail store turnover declining by 0.3 percent over the entire fiscal year.
Meanwhile, sales volumes for its manufacturing divisions, Ceramic Industries and Ezee Tile, experienced a slight increase of just over four percent, yet still faced a drop in actual sales.
Italtile acknowledged that these manufacturing sectors function at optimal capacity; however, subdued demand coupled with mounting input costs created unfavorable conditions for profitability.
Projections point to a potential decline of 11 to 16 percent in headline earnings per share, reflecting a drop from the R1.85 billion headline earnings registered in 2022.
The company further disclosed that the ongoing period witnessed a continuation of higher costs and increased interest rates, amplifying financial burdens on homeowners grappling with meager wage growth and substantial unemployment.
A weaker currency and inflation-driven escalations in input costs additionally contributed to reduced affordability within the domains of new construction and renovations.
Furthermore, Italtile identified an environment marked by “sociopolitical instability and country-specific risks,” causing a decline in consumer and investment sentiment. These unfavorable trading conditions translated into an industry-wide reduction in foot traffic and transaction volumes.
Amid these challenges, Italtile faced heightened competition from domestic and overseas competitors, as rivals expanded their market presence, production capacity, and product offerings.
Ravazzotti, the founder of Italtile, holds a significant stake in the company through Rallen Proprietary Limited, amounting to a 33.88-percent ownership. His holding is currently valued at $287.1 million.
