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Major projects drive Korvest sales surge

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South Australian cable and pipe supplier Korvest has announced a $7 million profit for the first half of the 2021-22 financial year following a huge jump in sales for its EzyStrut business.

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The Kilburn-based company reported a 58.3 per cent increase in sales in the six months to December 31 compared to the same period last year, to $51.6 million. This was also well up on the $37.2 million in sales reported in the six months to June 30 last year.

The listed company has two specialist divisions – EzyStrut and Korvest Galvanisers.

In a half-year report to the Australian Securities Exchange on January 21, it said unprecedented levels of large project work for EzyStrut had resulted in revenue increases in all Australian states.

EzyStrut sales were up 62 per cent to $47.8 million for the half while Korvest Galvanising generated $3.8 million, up 21 per cent.

All Korvest manufacturing, fabrication and galvanising is done in Adelaide. It also has sales offices and warehouses in Adelaide, Melbourne, Sydney, Brisbane, and Perth with distributors in Darwin, Townsville, Hobart and New Zealand.

In August the company sold its Power Step and Titan Technologies businesses, realising a pre-tax net profit from the sales of $740,000.

Chairman Andrew Stobart said the sharp increase in revenue for the half was the result of a concentration of large project work in the industrial products segment.

He said the small project and day-to-day market also improved during the six-month period.

“The EzyStrut business had a very strong first half,” Stobart said in a statement to the market.

“This business generally supplies either one or two major projects at any given time, however, in the current half, four major projects were supplied.

“It should be noted that significant input cost increases (steel and freight) required EzyStrut to pass these onto to customers via price rises and these have also contributed to the increase in revenue.”

Some of the company’s previous major projects have included the Adelaide Oval redevelopment, Port Stanvac desalination plant and Brisbane Airport Link Tunnel.

Korvest’s galvanising business also had a strong six months with overall volumes approaching record levels.

But it was also hit by increased zinc prices, which were passed on to customers.

“Galvanising benefited from the strong EzyStrut trading as all of the EzyStrut major projects utilise galvanised product,” Stobart said.

“This resulted in record internal tonnes for the half.

“External tonnes were marginally below the levels that have been achieved in recent halves although the average sell price was higher than it was in the PCP (previous corresponding period).”

The strong first half result led Korvest’s directors to announce a fully franked interim dividend of 25 cents per share.

Korvest was earmarked by Adelaide financial services firm Taylor Collison as a company to watch in InDaily’s 2021 South Australian Business Index, where it was ranked No. 79 in the listing of the state’s top 100 companies.

Its share price has also been on the move in the past six months, increasing from $4.95 on July 1 to $7.95 at Friday’s close, giving it a market capitalisation of $91 million.

However, the company has experienced some COVID-19 impacts in recent months with global supply chain disruptions that have delayed overseas shipments and resulted in significant freight cost increases for imported goods.

“In January 2022 we are now seeing workforce disruptions as staff are required to isolate as either COVID cases or close contacts of a COVID case,” Stobart said.

The company expects its market opportunities to remain promising in the next three to five years in line with a strong infrastructure pipeline.

Stobart said although Korvest had begun the second half with a strong order book of major infrastructure work, it was not expected that revenues in the next six months would match the record sales delivered in the first half of FY22.

“It is expected that the second half results will be more comparable with 2H FY21 than with FY22,” he said.

“The significant unknown is what the impact of the COVID-19 pandemic will be on Korvest’s operations and customer base over the remainder of the financial year.”

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