Pretoria - A production crisis at its Kentucky plant in the US dented the financial performance of Tiger Wheels (Tiwheel) in the six months to December.
Despite 37 percent growth in revenue to R1.6 billion, the listed wheel producer reported a headline loss of R1.23 a share, compared with a 56c profit in the previous corresponding period.
Tiwheel chairman Eddie Keizan said the main reason for the loss was a sudden production crisis, which led to significant losses incurred in the Kentucky wheel plant in November and December.
These losses were caused by a combination of management mistakes and unexpected market circumstances, he said. But remedial action was quickly taken, and since December, "the situation at the plant has steadily improved, with weekly production commitments and targets being exceeded".
"While the results for the full year will probably reflect a marginal increase in the headline loss the 74 percent-owned German-based ATS Group, now Tiwheel's only operating asset is forecasting a 20 percent increase in output for the June 2008 financial year, which over time should result in a return to acceptable profit levels."
Tiwheel unbundled its wheel and tyre retail and wholesale operations in South Africa and the UK from its global wheel manufacturing business in December. Tiger Automotive (Tiauto) was then separately listed in the JSE's speciality retailers sector.
Tiauto fared better than its former parent company when it yesterday reported a 15 percent increase in headline earnings a share to 61c in the six months to December. Revenue rose almost 10 percent to R536.5 million. But operating income declined almost 5 percent to R43.98 million.
Keith Rivers, Tiauto's group managing director, said that as pleasing as the increase in headline earnings was, it could have been better were it not for poor deliveries from Japanese tyre manufacturer Yokohama Rubber to Tiauto's South African and UK wholesale operations.
Rivers said year-on-year earnings were expected to be slightly higher.
Factors that would affect the company's performance in the second half included the expenses related to new store openings, a 16.5 percent discriminatory dumping duty on certain Chinese imported tyres and a general tightening of margins in a very competitive market. But Rivers said the longer-term prospects for growth in all Tiauto's South African operations remained promising.
Tiwheel shares lost 3.57 percent to R13.50 yesterday, while Tiauto dropped 2.82 percent to R13.80. The automobiles and parts sector fell 0.68 percent, and the general retailers sector rose 1.24 percent.