CORPORATE BROCHURE

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DAWNLTDwww.dawnltd.co.za

When Wholesale Housing Supplies (WHS), the company that was to become Dawn Ltd, first saw the light of day in 1997, its name described its business and focus pretty well. However, the market has changed, as customers got bigger and used their size to leverage their relationships. WHS mirrored the change, as it was acquired by City Investment

Holdings in 1998 and set its sights on transforming itself into a vertically-integrated distribution and trading specialist. It became Distribution and Warehouse Network—Dawn—in 1999.

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http://www.henkel.com

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With the vision of being a global leader in brands and technologies, Henkel has for 134 years been setting the pace. Active in over 125 countries, people around the world trust Henkel brands like Pattex, Tangit, Pritt, Loctite and many more. Dedication to sustainability and corporate social responsibility is a key factor in its commercial endeavors as is evident in its inclusion in the Dow Jones Sustainability World Index 2010. Its South African subsidiary closely aligns itself to key partners like Dawn Ltd and for the last seven years enjoyed exponential growth through its Hardware (WHD), Plumbing (Saffer) and Infrastructure (Incledon) divisions.

Henkel

The company achieved R1 billion turnover for the first time in 2004, made possible by a strategic focus on growth, served by acquisition. It now owns major brands including Cobra and Iska in brassware; Saffer and WHD in wholesale; Vaal, Libra and Plexicor in sanitaryware; and AFF and Roco in kitchen equipment. On the infrastructure side, Dawn owns DPI and Incledon and has significant holdings in Sangio and Fibrex.

Dawn describes itself as “centred on the manufacturing and wholesale distribution of quality branded hardware, sanitaryware, plumbing, kitchen, engineering and civil products”. Its growth has been quite remarkable—revenues in 2010 are in the region of R3.6 billion. The payroll is over 3,700 and it has operations across South Africa, in other African countries and in Mauritius.

However, size is no protection against the harsh winds of economic reality. The downturn had an impact, with revenues and activities down pretty much across the board. But the mark of resilience is not whether or not a company was affected by the situation—it is how it deals with it and emerges on the other side. In that respect, Dawn has done pretty well. Its year-end results presentation, dated September 2010, throws the challenges it has faced into stark relief—and illustrates what it has been doing to turn things round.

Total revenues in the year were down nine per cent over the same period in 2009, which may seem curious but the full effect of the recession had

not revealed its impact. That came through in the second half of 2009, when the company recorded a loss of R54.9 million. The good news comes under various headings—while margin fell, it was by only 0.5 per cent, to 5.7 per cent. Earnings per share also fell, by 16 per cent—but that is uncomfortable, rather than catastrophic. In the same period, total debt was reduced by approaching two-thirds, to 21 per cent (R285 million).

Dawn has clearly moved swiftly in order to ensure its continued progress. It has said that evolving market dynamics make it important to manage its businesses according to the markets they serve. Accordingly, it has restructured its business into ‘Building and Infrastructure’, rather than ‘Trading and Manufacturing’. In doing so, it has highlighted where the current resilience resides. The Building operations, which include wholesale, brassware, sanitaryware and kitchen segments, never fell into loss, even at the depths of the recession; the company puts this down to early decisions to ‘rightsize’ for current levels of activity. That included headcount reduction of over 700 and cancellation or postponement of capital projects while, at the same time, ensuring it retained the capacity to take advantage of the upturn. Profits have recovered strongly, although not yet to the high levels seen in the boom that busted in mid-2009.

On the other hand, Infrastructure (which includes DPI, Incledon and the holdings in Sangio and Fibrex) continues to experience shrinkage—but this is not expected to continue indefinitely. Dawn says that current performance is due to a lack of infrastructure projects and extremely low water and sanitation spend in its markets. However, people need water and sanitation services—and so does the country. It was because of South Africa’s investment in infrastructure improvements, beginning in 2003/2004, that Dawn bought DPI and Incledon in the mid-2000s, which took it further into infrastructure work. Despite the current reduced level of activity in the sector, the company sees a future of sustainable, long-term growth—in water and sanitation particularly. In 2008, the South African government pledged state investment of R800 billion to improve the infrastructure, so the company’s strategy remains in place.

Activity in Dawn’s Building segment reflects shifts in market demand. Residential and ‘additions and alterations’ (to existing buildings) have increased

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their share of its overall sales; the commercial and non-residential sector has seen a significant decline, from 16 per cent market share to just 11 per cent. Overall, the company’s share of these markets has actually increased, a performance it ascribes to competitive advantages achieved by its investment in efficient business processes, including JIT (just-in-time) deliveries. As the ‘D’ in Dawn’s name stands for ‘Distribution’, it is to be expected that it will have its own transport facilities—and that is indeed the case. It has its own fleet of trucks, for long-haul and more local deliveries.

But transport is a cost that can run away with itself if it isn’t monitored. Dawn has invested in factories producing piping, for example, in other markets in Africa. It sees no value in ‘transporting air’, and one cannot take issue with that kind of logic. Green issues are moving up the agenda in general; Dawn recently assigned a board member specific responsibility for improving environmental and energy performance.

Looking to the future, Dawn has announced its intention to gain further market share through capitalising on the leaner mindset of merchants. While they are expected to continue cautious restocking, they don’t want to be caught with loads of inventory that suddenly takes months to shift. Dawn’s JIT strategy fits in with those ideas and the drive to optimise working capital. It believes it has the structure in place to drive modest growth and increase profitability in a market that will continue on a gentle upward curve, rather than return to boom. www.dawnltd.co.za

Maksal is the dominant force in the non-ferrous tube and extrusion industry in Africa. Its main business is the manufacture of copper tubing. In addition to its huge manufacturing plant Maksal has a branch network countrywide with distribution centres in Cape Town, Durban and Port Elizabeth. Maksal supplies copper tubing to market segments for air-conditioning and refrigeration, the plumbing industry as well as the industrial market and medical grade market. Since 1970 Saffer, a division of Dawn, has been Maksal’s biggest customer. Maksal is proud of its association with the Dawn Group and congratulates the Group on their phenomenal achievements to date.

Maksal

DAWNLTDwww.dawnltd.co.za