South African tycoon Giovanni Ravazzotti's Italtile nears sale of Australian tile business

Italtile Ltd., the tile and bathroom retailer founded by South African tycoon Giovanni Ravazzotti, said discussions over its Australian operations are at an advanced stage as it moves to leave the country after more than two decades.

The Johannesburg-listed group gave the update at its annual general meeting on Nov. 13, alongside a trading statement showing retail turnover grew about 1% in the four months from July to October. Higher average selling prices drove the increase. Operating costs rose about 3% over the period.

Italtile first disclosed in August that it was reviewing its continued presence in Australia and was in advanced talks with a prospective buyer, with due diligence under way. It has not named the buyer or disclosed a price.

Fraud in the Australian unit

The Australian business, National Ceramic Industries Australia, runs the Centaurus tile factory, Italtile's only manufacturing plant outside South Africa. The plant came online in 2004 and doubled its capacity in 2007.

A forensic investigation disclosed with Italtile's annual results in August found "intentional manipulation of results" by the person responsible for the unit's accounts, with a negative impact of A$7.6 million. The person no longer works for the group, and the investigation found no evidence of theft. Italtile also gave the Australian unit A$4.5 million in cash support during the year, mostly for a new tile rectification line.

"We had actually made the decision to exit the country before any of these irregularities were picked up," Chief Executive Officer Brandon Wood said at the time.

Pressure at home

The South African business faces a tough market. Tile volumes were held back by port congestion and shipping delays, and the group's manufacturing arm, Ceramic Industries, is dealing with strong competition, low-priced imports and rising energy costs. Italtile said continued economic uncertainty would weigh on near-term performance.

In the year to June, turnover rose 1% to R11.3 billion ($681 million), trading profit fell 10.4% to R1.8 billion ($108 million) and headline earnings per share dropped 9.4% to 113.4 cents. The group declared a final dividend of 45 cents a share and a special dividend of 25 cents.

Shareholders approved all resolutions at the meeting. Brand Pretorius, the former Toyota South Africa and McCarthy executive, retired from the board after 15 years as an independent non-executive director.

Ravazzotti, an Italian-born entrepreneur, opened the first Italtile store in Johannesburg in 1969 and built the group into South Africa's largest tile retailer, with brands including CTM, Italtile Retail and TopT. He is a non-executive director, and his family remains among the company's largest shareholders. Wood took over as CEO on July 1 from Lance Foxcroft, who stepped down for family reasons.

Figures were converted at R16.6 to the dollar.