Major company closing stores due to crime in South Africa

Italtile said it has had to relocate or even close some of its stores in unsafe areas of South Africa, as the company called on the local government to make necessary changes.

Founded in 1969, Italtile is a South African manufacturer, franchisor and retailer of tiles, bathroomware and other home-finishing products.

The company’s retail brands are CTM, Italtile Retail and TopT, represented through a total network of 211 stores, including seven online webstores.

In its results for the six months through December 2024, Italtile said South Africa is increasingly viewed as a difficult and unsupportive location for the manufacturing sector.

The company said this undermines the sector’s confidence in and contribution to the local economy.

“In contrast, many of our neighbouring countries offer attractive investor-friendly environments and incentives for manufacturers, which has encouraged the recent spate of new investment by large global Chinese tile producers across our borders,” the company said. 

“These companies are not governed by the regulatory framework South African companies are subject to, including extensive labour-related and environmental taxes and costs.” 

In addition, the company explained that SADC-manufactured exports to South Africa are exempt from import duties and tariffs.

However, some SADC countries with tile production facilities have implemented excise duties to protect their local producers. 

“It is incumbent on the government to consider the impact of this uneven playing field for South African manufacturers,” the company said.

It added that the cost of combating escalating crime in South Africa continues to rise. 

“Ensuring that our customers, staff and stores are secure is a primary concern to management and a growing expense to the business,” it said. 

“As criminal behaviour and illegal activities flourish, we are continuously committing significant effort and investment to bolster our security ecosystem, including, in extreme cases, relocating or closing stores in unsafe areas.”

Despite improvements in South Africa’s economy, Italtile said it is cautious regarding the sustainability of this positive trend.

It said its six-month reporting period was characterised by two distinct halves.

The first half saw consumer confidence and spending in the building and construction sector remain subdued amidst high interest rates and inflation.

It said this restricted disposable income and discretionary investment and impacted the affordability of renovation and new-build projects.

The second half saw consumer sentiment and confidence lift following the successful and peaceful transition to a Government of National Unity.

In this three-month period, homeowners’ disposable income also increased as a result of two interest rate cuts, generally lower inflation levels and payouts released by the two-pot pension fund reforms. 

“Albeit that the full effect of these economic stimulus measures will take time to filter through before significantly impacting on demand and spending, there was a notable uptick in group sales in the latter part of the review period,” it said.

However, the company said its management is cautious regarding the sustainability of this positive trend, particularly since the impact of the once-off cash injection provided by the two-pot retirement funds has started to diminish.

Regardless of these doubts, the second half of Italtile’s interim period buoyed the group’s results, as the company benefitted from the uptick in consumer sentiment and spending.

Italtile’s revenue stayed flat, decreasing by a modest 0.33% to R4.78 billion, while the company’s cost of sales also remained largely unchanged at R2.82 billion.

However, its profit for the six-month period grew by 4% to R866 million. The company’s earnings per share increased by 5% to 70.6 cents per share.

In the company’s Retail division, TopT delivered another consecutive set of good results, while CTM showed early signs of turning around its recent disappointing results. 

The East Africa region also improved its performance in the period, after the challenging prior six months. 

“Our webstore offering grew traffic and sales, a pleasing achievement,” the company said.

In the Manufacturing division, Ezee Tile delivered another solid performance, albeit off a low base, and its flagship Vulcania factory is now operating close to design specification. 

While Ceramic’s results were markedly stronger in the second half of the reporting period than the first, this segment’s results declined overall, as selling prices remained under pressure and production cost reductions only filtered into the business toward the end of the second half. 

While Italtile’s Tile division reported slightly weaker results for the six-month period, it managed to remain resilient when faced with excess capacity in the market and prevailing price wars

The company’s Sanitaryware division grew its key metrics. However, it said there are further opportunities to improve internal efficiencies.

Overall, Italtile reported system-wide turnover of R6.1 billion, down 1% from the previous year.

Italtile declared a dividend of 28 cents per share, up 4% from 2023.