“It came from China, went via Singapore, into Newcastle and then down to Melbourne. It was a combination of sanitaryware, toilets and some of the tapwares.”
Chartering the vessels added to rising freight costs, which have driven GWA to push through price increases in July of 3 per cent and then another 4 per cent in December. It marks the latest company also reporting inflationary pressures.
Mr Meyerhans said the increases were not a blanket price rise but more specific to how GWA’s products compared to the market. It was across toilet suites, tapware and accessories.
He said the main driver was the “substantial increase in freight costs”, which year on year could be up to $8 million and double the previous corresponding period.
Raw materials had only increased up to 2 per cent. Mr Meyerhans anticipated the price rises would offset the increased costs.
The detail came as GWA unveiled a 0.3 per cent rise in half-year statutory profits to $18.6 million. On GWA’s preferred “normalised” basis, which excluded costs such as implementing a new technology system, profits lifted 11.7 per cent to $22.36 million.
Sales revenue rose only 2.1 per cent to $201.3 million, with Australia lifting sales 6 per cent but other regions tumbling.
The tough period included COVID-19 sparking some lockdowns, such as five weeks in New Zealand, where GWA sells product. ”Basically we didn’t sell anything” there in that time, Mr Meyerhans said.
‘Outlook improving’
“If I look at all the hurdles in the first half I think we’ve delivered a solid result,” he said. “And we are very positive for the second half.”
Dividends were also boosted to 7¢ a share from 6¢. GWA shares fell 7¢ to $2.53 by afternoon trade.
Morgans analyst Alexander Lu, in a note to clients, said the result overall was good “with the balance sheet remaining healthy and outlook improving”.
Strong points included a jump in margins despite higher freight costs, while a negative was a fall in operating cash flow.
GWA said on a continuing operations basis, cash flow had fallen 12 per cent to $43.6 million. The driving factor was that it was trying to build up inventory to avoid any supply chain problems.
The company’s markets include commercial businesses installing water systems or people renovating bathrooms and kitchens in their homes.
GWA expected the renovation and replacement segment for both residential and commercial markets would show “continued momentum”.
But it said labour tightness and supply chain disruptions meant that completions of structures – particularly freestanding houses – would be extended from nine to 12 months to up to 15 months. That mean GWA expected such activity to “remain strong” into next financial year.
Mr Meyerhans said refurbishments of commercial buildings was showing strong growth as landlords focused on hygiene and touchless facilities in bathrooms as the number of people using offices was subdued.
But he predicted demand for product in new commercial buildings would remain flat for the year, lifting once confidence returned.
