South African tycoon Giovanni Ravazzotti's Italtile warns earnings will fall on cheap imports

Italtile expects headline earnings per share to fall by between 7.5 percent and 12.4 percent for the year to June, as cheap imported tiles squeeze the manufacturing business that Giovanni Ravazzotti built to insulate the group from foreign competition half a century ago.

The Johannesburg-listed home improvement group told shareholders on Tuesday that headline earnings per share would drop from 125.1 cents in the previous year, putting the range between roughly 109.6 cents and 115.7 cents, according to Billionaires.Africa calculations. Earnings per share are expected to fall 12.7 percent.

Ravazzotti founded Italtile in 1969 and holds 56.46 percent of it, about 746.24 million shares, through the family vehicle Rallen. Free float on the counter runs at just over 28 percent.

Ceramic Industries, the manufacturing arm in which Italtile holds 95.47 percent, was the main drag on group performance. Trading held relatively stable across most of the other businesses.

The tile manufacturing industry continued to face excess global supply, cheaper imported products and weak demand, the company said, conditions that have driven continued price deflation and squeezed manufacturers' margins.

"The manufacturing imbalance, intense competition, and demand constraints have continued to drive price deflation," Italtile said.

Combined manufacturing sales at Ceramic Industries and Ezee Tile Adhesive Manufacturers, in which the group holds 71.54 percent, fell 1 percent against the previous year. Margins at Ceramic Industries stayed under severe pressure from market pricing and higher energy costs, with rising transport, fuel, gas and municipal charges adding to the strain.

The warning follows action by South Africa's trade regulator. The International Trade Administration Commission announced provisional anti-dumping duties on ceramic and porcelain wall and floor tiles in July. Italtile attributed the measures to global overcapacity and the dumping of cheaper products into South Africa and other African markets, and noted that other countries have introduced trade barriers to protect their own industries.

Retail held up better than manufacturing. System-wide turnover across CTM, Italtile Retail and TopT was stable year on year. Italtile Retail recorded improved sales and volumes. CTM remained stable despite a weaker second half after four shops were franchised, and TopT posted modest sales growth. The group's online stores generated higher traffic and sales.

Sales through the integrated import supply chain businesses dropped 6 percent, which Italtile said was offset by better margins from exchange rate gains and improved buying.

"Though the current macro environment does not support rapid topline growth, we remain focused on the factors within our control: maintaining lean, efficient, cost-competitive and flexible operations," the company said.

The pressure has been building for more than a year. Italtile warned in October that South African manufacturing was on the brink, and the group has spent successive reporting periods pointing to weak GDP growth, subdued homeowner confidence and constrained consumer budgets.

The manufacturing exposure is relatively recent in a company that began as an importer. Ravazzotti moved from Italy to Johannesburg and started Italtile in 1969 selling imported tiles into a rapidly urbanising market. He began manufacturing domestically about a decade later, as the prospect of trade sanctions grew following the 1976 Soweto uprising. The company listed on the Johannesburg Stock Exchange in 1992 and bought control of Ceramic Industries in October 2017, completing the vertical integration that now carries the losses.

The group operates around 210 stores across four retail brands, Italtile Retail, CTM, TopT and U-Light, along with the import businesses International Tap Distributors and Cedar Point. It reported revenue of R9.06 billion and net income of R1.5 billion for the 2024 financial year, with more than 3,000 employees.

Italtile announced in December that chief executive Lance Foxcroft, who took the role in January 2022 after running Ceramic Industries, would step down in June 2026.

The group publishes full-year results on or about Aug. 24.