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A.b.e Construction Chemicals ("ABU") released its interim results for the period ended November 2009 yesterday. Amidst recessionary pressures and local construction slow down, ABU managed to not only keep revenues relatively flat at R136 million from R140 million the comparative period last year, but the cost of sales was strongly contained to boost the gross margin from 39% to 41%. This critically boosted gross profits upwards by around R2 million that basically filtered all the way through to increasing the bottomline profits by R1,5 million. Management explains that this critical gross margin expansion was "...as a result of a close focus on pricing and tight management of raw materials and other input costs." EPS and HEPS grew to 15,5c and 15,6c from 14c in the prior interim period, while net cash on the balance sheet grew from R21,9 million to R29,7 million. Operations generated over R20,7 million. The Group is a leading supplier of specialist construction related products nationally and into sub-Saharan Africa. It is a major supplier of high performance products to the building, civil engineering, maintenance, manufacturing, builders' merchant and hardware store businesses, with manufacturing plants in Johannesburg (Boksburg) and Durban (Isipingo). a.b.e is a leader in its field with many well respected brands and also represents a number of quality international manufacturers. Concerning the future, directors interestingly explain how "...traditionally revenue and hence profits are not earned evenly throughout the year, the first half being more robust than the second. These conditions are expected to be more prevalent in 2010 because of the delayed recovery in economic activity. In addition, the Company has to meet the costs associated with the resignation of the former CEO." The change of CEO seems not to have troubled the market as ABU rose 12% to 130c at the close of yesterday putting it on an historical DY of 8.62%. Bearing in mind that if the margin and profit growth flows through to the second half of the financial year, ABU's forward DY should be a fair bit higher. I maintain my recommendation on ABU that you can purchase a look at here.
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