Western Cape Business News

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BUILDING: KayDav Group Shows Its Mettle


Recent Western Cape Business News

OTTERY-based wood board distributor KayDav Group has showed its mettle by managing small growth in interim profits – a small victory in the face of a prolonged slowdown in building activity in its main markets.

KayDav, which was formed in 2007 by the merger of Cape-based Davidson’s Discount Boards and Gauteng-based Kayreed Trading, is a large scale distributor of raw and value added wooden boards to mainly the construction and manufacturing industries (including the shop-fitting, kitchen and furniture markets).

CBN first reported on KayDav in March this year when the business sold off its struggling Bellville-based timber manufacturing plant, Castle Timbers.

Interim results for the half-year to end June showed revenue stretching by around 3% to R221 million with earnings creeping up 4% to R5.8 million.

CEO Gary Davidson says the interim results should be considered satisfactory considering the tough trading conditions in the industry.

Last year KayDav bemoaned the scant opportunities for pricing power in the wood board sector.

Most board panels sold by KayDav are sourced through two local dominant manufacturers, who pretty much set prices in the market.

Last year Davidson argued that import parity pricing and significant excess capacity by both of these players - coupled with new market entrants fighting for market share - caused a lack of selling price inflation during the financial year to end December 2010.

In this regard it’s most encouraging to see that the growth in KayDav’s top line did not come at the expense of margins. In fact the gross trading margin improved slightly to 31%.

This adds much credence to what Davidson wrote in his annual review, that “the lack of selling price inflation experienced is a cyclical issue” and that KayDav was “committed to grow market share whilst focusing on margins and cost control”.

The results are also particularly pleasing after Davidson reported in last year’s annual report that the company’s upgrading facility at Epping was aimed at improving turnover and profitability.

The second half should be interesting to gauge with KayDav traditionally enjoying stronger trading in the second half of the financial year.

In his interim report, Davidson says KayDav anticipates that the increase in lending by financial institutions and increased consumer spending power will increase activity levels in the wood board sector.

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