2019 will be a year of consolidation for British Investment Group, PFE International and the companies within its group – Durban-based Van Dyck Floors and Hammarsdale based truck tyre recycler, Mathe Group and PFE Extrusion, which produces polypropylene fibre and bulk continuous filament yarn.
For managing director, Dr Mehran Zarrebini, and the approximately 700 employees across the group, it will be business as usual with further major investments still on the table but likely to materialise only in the longer term.
“We’ve done quite a bit of investment over the past five years, so it’s a matter of leveraging off this and trying to ensure that whatever capacities we’ve brought on stream can be fully utilized. During 2019, we’ll be taking a consolidative approach and focusing on improving efficiency and productivity, Zarrebini explained.
He pointed out that, during 2018, economic difficulties that impacted negatively on the manufacturing sector as a whole. These were a continuation of a downward trend from previous years. While some issues that had contributed towards a volatile rand and spiraling raw material and production costs had been locally instigated, global geo political issues that had impacted on emerging markets and over which South Africa had no control had also increased pressure on local producers.
He cautioned that there were no quick fixes and 2019 promised to be another challenging year. However, he remains cautiously optimistic and noted that both international investors such as PFE International and local manufacturers needed to take a longer term view of recovery.
“Both existing investors and those considering coming into this country can’t be myopic. There may be challenges but there are also a lot of opportunities to generate growth. We are in a similar position to 2008/9 and we need to take a 10 to 20-year view rather than a shorter, five- year approach. Right now, it is a question of mitigating risks in a turbulent landscape. You have to focus on being more resilient rather than on performance perse. That way, you will build internal capacity to ride out the economic head winds and ultimately find yourself in a far stronger position,” he advised.
Zarrebini said that companies within the PFE International stable had registered strong performances during 2018 with truck tyre recycler, Mathe Group, more than doubling production and PFE Extrusion increasing volumes by 25 percent by broadening its client base and working closely with its new companies on research and development.
Van Dyck Floors, which had maintained level growth over the past two years, came under the greatest pressure during 2018 because it operated in both the commercial and residential markets.
“Whereas, in the past, the commercial market has always been buoyant while the residential market came under pressure due to shrinking disposable incomes, last year we saw contraction within the commercial market. The construction sector came under considerable pressure. This reflected in a decline in new developments as well as less refurbishment of existing properties.”
He added that this highly competitive market had also been pressured by growing demand for ceramic flooring and an erosion of the soft flooring market as well as competition from imports from the Far East.
He said that Van Dyck Floors intended to develop new business and grow its share of the stagnant flooring market during 2019. This would enable it to maintain margins whilst increasing volumes in order to offset rising production costs.
“Like all companies, our manufacturing cost base is increasing year on year. We’ve been fortunate in that we haven’t reduced our employment figures since we bought the company and it is our aim to remain like this so we have to increase sales and develop both local and export markets,” he pointed out.
So far, Van Dyck Floors has performed well in South Africa, Zimbabwe, Botswana, Lesotho and Namibia. There are plans to expand further north and to establish a presence in Ghana, Cameroon, Nigeria and Kenya.
Zarrebini said that Van Dyck Floors had positioned itself differently when it came to both its soft and hard flooring ranges and had expanded its product offering dramatically which would place the company in a positive position for 2019.
“This will have a very positive impact in 2019. During 2018, we began to see the positive effect of differentiation. Even though the market is constrained, products that are highly differentiated and unlike others in the market have registered strong performance and good sales. There are still buyers who have disposable income to spend on products where they see value so we are hoping to tap into markets that were previously unexplored,” he said.
One of the biggest success stories has been the roll out of a national Easigrass franchise network. According to Zarrebini, sales have grown dramatically during 2018. Although this was initially concentrated in the Western Cape, the well-known British artificial turf brand has quickly gained traction in other provinces as well as in neighbouring countries such as Namibia, Zimbabwe and Botswana.
He said that Easigrass would target opportunities in the commercial sector during 2019 and intended growing its franchise network.
“A number of new products have been developed specifically for South Africa. We will continue to import and add new products that are better suited to the local market whilst also manufacturing some products locally. This is having a very positive impact on our high volume customers,” he added.
Overall, he said that Van Dyck Floors had increased its supplier base and was now working with some of the biggest and most innovative companies in the world. Companies across the group would develop even stronger relationships with experts in their fields and leverage off this in order to launch more innovative products during 2019.