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| Steinhoff
Africa |
Furniture
| Timber
| Raw materials | PG
Bison | Logistics | Exports Unitrans | India | |
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| Danie van der Merwe | |||||||||||||||||||||
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| 62 FACTORIES, 25 DISTRIBUTION CENTRES AND 62 MOTOR DEALERSHIPS | |||||||||||||||||||||
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Managing director This division’s strategic objective is to strengthen its position
as the leading manufacturer of household goods in southern and central
Africa and to grow through exports and supply of related raw materials
and components in southern Africa and to Europe.
Factors and strategic advantages which had an effect on our performance and which will continue to play a role include:
Market As a result of the strength of the rand, imported products have become a threat and the relative pricing of imported electrical and audiovisual equipment has impacted on buying patterns. The division is actively investigating other markets in Africa and the Middle East to ensure full utilisation of our production capacities. Our raw material division has started foam production in Mozambique and expects to conduct a similar venture in Angola, drawing on the experience of our existing operations in Namibia, while the furniture division also plans to commence manufacturing in Mozambique. The division continuously investigates opportunities in furthering black economic empowerment and has supported Mvelaphanda Capital, Arch Equity and an empowerment trust for employees of Unitrans in subscribing for shares in Unitrans Limited. Revenue Furniture Our manufacturing divisions responded well to buoyant market conditions experienced during the year. We have also expanded our import division to take advantage of opportunities arising from the strength of the rand and increased production from China. The import division derives benefits from the Steinhoff International sourcing division. Steinhoff imports also launched Steinhoff Living which focuses on supplying accessories to furniture. Six of Steinhoff Africa’s production facilities manufacture upholstered furniture, producing a wide variety of both static and motion lounge furniture in fabric and leather. In the financial year ended 30 June 2005, approximately 8,7% of our southern African upholstered furniture production, based on revenue, was exported. Our Grafton Everest facility in Durban is the largest upholstered furniture factory in southern Africa in terms of production volume. Our Alpine brand furniture, manufactured at our Cape Town facility, consists of quality leather static and motion furniture of which a portion is exported to the United Kingdom. In the bedding division, we produce a wide range of base sets and mattresses under exclusive licences including Sealy, Slumberland, Ther-A-Pedic and Edblo. We also produce high volumes of low-cost base sets and mattresses under the Softex brand. Our raw material companies supply most of the components used in our bedding manufacturing operations. We believe significant growth potential exists in the bedding market in southern Africa, and in the medium term we are seeking to expand our bedding production operations to other countries in southern Africa, including Mozambique and Angola. The investment we have made in Zimbabwe has added to this strategy. We have three factories manufacturing bedding and foam components in Namibia and Botswana which produce foam and inner spring mattresses for their respective local markets as well as for export to Angola, while a similar factory in Zimbabwe produces similar products for that local market. Our solid timber case goods factory, based in Cape Town, produces tables, chairs, diningroom suites and bedroom suites. This facility was extensively damaged by fire during the year under review. The damaged sections were rebuilt and it became fully operational in September 2005. This division enhanced its product range with products such as pillows, duvets and linen, which are distributed under branded ranges. We produce a wide variety of non-solid timber case goods made of particleboard upgraded with foil or veneer. Products from our four foil case goods factories are mainly sold in the local market. Significant growth potential exists in the bedding market in southern Africa, and in the medium term we are seeking to expand our bedding production operations to other countries in southern Africa Raw materials Vitafoam produces flexible polyurethane foam for use in the furniture, bedding and packaging industries as well as a range of consumable products, such as economy foam mattresses. It has ten production plants located in South Africa, Namibia, Botswana and Mozambique. It also produces fibre products used in furniture production and pillows. Vitafoam sells its products exclusively into the southern African market. Approximately half its output is consumed by other group companies and the balance by third parties. We operate four textile facilities, namely, Jatex, Loungeweave, Dyehouse and Mattex. The division continuously upgrades and installs technologically advanced equipment to retain its competitive edge in the market and comply with standards set by export markets. The adverse effect of the increase in capacity in China is also experienced by this division, both in terms of price competitiveness as well as variety of products. Jatex manufactures flat woven fabrics for upholstered furniture, curtaining and napery applications at its Rosslyn (Gauteng) factory, as well as printed stitchbond fabrics used for mattress ticking. Loungeweave produces woven jacquard and damask mattress ticking in its factory in Isithebe (KwaZulu- Natal). Its operations also include a yarn-dyeing facility in Isithebe to support the weaving unit. Its production currently supplies our own factories as well as other southern African manufacturers. Loungeweave has made significant investments in new advanced looms, which should further enhance the range of products it can offer customers while expanding production capacity. Mattex is a Cape Town-based jacquard-weaving factory producing a wide range of damask mattress ticking, vertical blind fabrics, woven tape and napery products. Mattex has recently invested in modern equipment to supply quality jacquards into Europe, both to our own European operations as well as to third parties. Timber division In December 2003, we entered into agreements with the remaining shareholders in PG Bison Holdings (Pty) Limited to acquire the remaining shares in this company. This transaction was approved by the competition authorities in June 2004. During the year, PG Bison completed the expansion and upgrading of its Piet Retief particleboard plant, at a cost of R100 million. The expansion significantly added to total particleboard production capacity in South Africa. PG Bison’s major product range consists of:
Raw material division produces foam, textiles and components for use in our products and for sale to third parties locally and in Africa, western Europe and Australia Timber and forestry We currently own and manage 7 000 hectares of forest, mostly located in the southern Cape. We source the rest of our timber requirements locally from third parties. We intend to secure an increasing proportion of our timber through long-term supply arrangements or through our own production. We intend to invest further in forestry assets in the coming year to ensure the efficient management of the forests and a reliable supply of FSC-certified timber for use in the furniture industry. Our timber and sawmilling division sources and produces timber which we use for our products and also sell for export, and produces timber-related products, such as pallets, treated poles and cable drums, to improve the recovery of timber which is unsuitable for use in our furniture manufacturing operations. We own four operating sawmills. During the year, the new sawmill at George, constructed at a cost of approximately R115 million, became fully operational. The higher-grade timber is supplied to our furniture and door factories. Lower-grade timber is used to produce furniture frames and bedding bases. Sections of the logs which we cannot use in our manufacturing operations are used to produce other timber products such as transmission poles, some of which are exported, and pallets and cable drums sold in the local market. The experience which the PG Bison management team is already contributing to the timber division is expected to enhance opportunities in this division even further. Exports Steincraft, a factory located in greater Durban, produces solid timber chairs, garden furniture and patio furniture for the global export market. Most of Steincraft's products are exported, primarily to the UK and the rest of Europe. Steincraft is our only facility which utilises the indigenous hardwoods grown in South Africa. We currently have two door manufacturing operations which own four manufacturing plants. Significant re-engineering interventions were effected during the year to counter the effect of the strong rand. This should create a stronger base to grow and serve the export and local market. Moxwood operates three factories and produces quality solid pine timber doors and related products for the export market. Doorwise currently has one facility producing hollow core doors for the local market and a limited number of fire doors (hollow core filled doors) which are exported primarily to the United States and to the United Kingdom. Our House of York operation produces a wide variety of household products and shelving under its own brand for local and export markets, including wooden kitchenware and bathroom furniture as well as storage units and fireplace surrounds. Its products are manufactured using smaller pieces of timber recovered from our own sawmilling operations and those of others, helping to maximise the recovery and use of timber from our sawmills. The new sawmill at George, constructed at a cost of approximately R115 million, is fully operational Logistics We believe our investments in logistics will enable us to source cost-effective, efficient and reliable distribution channels for our products. We have exercised our pre-emptive rights on an additional stake in Unitrans Unitrans Roadway Logistics deals with the distribution of household goods in South Africa and provides similar services to other clients in South Africa. It also provides warehousing services. We chose Unitrans as our primary strategic partner for distribution in southern Africa based on its strong reputation and management team and its footprint in sub-Saharan Africa. We believe Unitrans also has the ability to grow with our operations worldwide. Unitrans previously announced the purchase of 13,02% of the group’s total equity by Fundiswa Investments (Proprietary) Limited (Fundiswa), a combination of Mvelaphanda Capital (Proprietary) Limited (Mvelaphanda), Arch Equity Limited (Arch Equity) and an employee trust which, together with the Steinhoff holding, has given Unitrans a strong shareholding support base. Freight and logistics Motors Passenger Business environment The three-year strengthening trend of the rand to the end of 2004 has been a major factor behind the lowering of inflation levels to within the 3% to 6% target range. This has allowed interest rates to be lowered to multi-decade lows. Monetary and fiscal management of the economy has, over this period, been in line with global best practice and the South African economy has increasingly been integrated into the global economy. The rand now appears to be ready to trade in a more cyclical fashion alongside the natural business cycle. Despite the continuously improving performance of the South African economy, and significant job creation flowing from it, South Africa still suffers from a large overhang of structural unemployment, which exceeds a quarter of our employment-seeking population. This unhappy situation is exacerbated by a skills mismatch between the needs of the economy and the skills of individuals seeking employment. Current initiatives by government to rectify this are encouraging. Full details of Unitrans are available in its annual report 2005 and on its website on www.unitrans.co.za. India The production from this venture is exported to our factories in eastern Europe for use in our upholstered products sold into the German market |
