PFE International remained focused on its long-term strategy during 2016 in a stagnated South African economy and a business climate with little or no sign of an upturn on the horizon.
This is according to Dr Mehran Zarrebini, CEO of the group of companies which includes Van Dyck Carpets, Easigrass, tyre recyclers Mathe Group, polypropylene staple fibre producer PFE Extrusion and Envirobuild, manufacturers of eco-friendly rubber flooring.
“Despite difficult trading conditions, our companies performed well this year through balancing operational risk with financial risk,” he said.
“Recent economic data and monthly indicators point to expectations of little or no significant recovery in 2017. Growth remains a particular concern for South Africa coupled with high levels of unemployment, political turmoil and a lack of investor confidence. Whilst the country managed to steer clear of a ratings downgrade in 2016, it is still uncertain whether the country can continue to navigate through this headwind during the course of this year.”
“As a family-owned entity with a turnover of more than R600 million, we are cost and risk conscious. We scrutinise investments and expansion plans whilst remaining committed to South Africa and to further investment in our diversified portfolio of companies. We continuously aim to manage and position the group for the long term.”
Looking back on 2016, Zarrebini said that load shedding had had a significant impact on the group’s operations.
“Our extrusion facilities were severely affected due to operational requirements with respect to heating. This resulted in decreased output. Fortunately, as the load shedding subsided, it was possible to meet customer requirements,” he said.
Being an organisation that trades internationally, PFE was also at the mercy of exchange rate fluctuations.
“Our focus is on the production and manufacture of raw materials and products and not in hedging currencies. Whilst various options are at our disposal to mitigate currency risk, including forward contracts and managing currency exposure through business practices, our approach has been one of prudence and risk minimization. There is just too much uncertainty and volatility to successfully employ any particular method,” Zarrebini said.
PFE invested in significant capital projects during 2016 – in the installation and commissioning of new machinery as well as in upgrading processes and improving efficiencies.
Mathe Group saw the largest investment – in a new tyre facility commissioned in February which has now processed more than 100 000 truck tyres.
“We expect increased off take this year as we secure new clients in different industries and look forward to become the leading processor of waste tyres in South Africa,” Zarrebini said.
“The new waste tyre processing facility led to investment in new machinery at Envirobuild for the manufacture of commercial rubber flooring from Mathe Group’s rubber crumb. Further investment is planned in the use of rubber crumb for the manufacture of novel and innovative new products.”
“Because the industry is still in its infancy in South Africa, our focus will then shift towards activities such as educating professionals and potential future consumers about the benefits of using these products.”
Polypropylene staple fibre producer, PFE Extrusion, also saw investment in new technology last year.
“This was necessary to remain internationally competitive with a strong emphasis on incorporating resource efficiency and resource reduction into the manufacture of the different products,” Zarrebini said.
“Over the past few years we have seen supplies of raw materials become scarcer, and thus more expensive. They are also subject to price volatility. Our focus remains an opportunistic one as we continue our journey to transform our operations and increase resource productivity and rethink our business model to capture value residing in resource ownership.”
He added that he believed the minimisation of resource usage would continue to unlock significant value whilst establishing greater operational stability throughout the group.
Zarrebini is very optimistic about the group’s artificial grass brand, Easigrass, which continues to grow and excel as drought, maintenance and environmental factors increase preference for the installation of artificial grass, both for landscaping and commercial purposes.
“With Easigrass, we have a strong emphasis on lead generation through digital and social media advertising, which our partner network can leverage from,” he said. “This network is expanding steadily and is expected to continue throughout 2017 both locally in South Africa and internationally in the SADC region.”
Zarrebini envisages further increases in market share with various product categories.
“The demand for recycled rubber paving products is expected to increase as consumers and business clients source products with enhanced green credentials. We expect growth to continue throughout the year as we add further capacity to our production.”
In the flooring segment, he foresees increased growth for their resilient and hard flooring products this year.
“The market has taken favourably to various product offerings launched in 2016 including luxury vinyl tile (LVT) planks in different sizes and colours, water-resistant laminate flooring and our more recently launched woven vinyl tiles. We have also expanded our range of commercial and residential flooring options and will launch new products later this year,” he said.
The companies in the PFE stable have well established local and international accreditations including the ISO 9001 quality standard, ISO 14001 environmental accreditation, ISO 15000 energy certification and ISO 14064-1 for greenhouse emissions management. Van Dyck Carpets also has Carbon Trust Standard certification and Envirobuild’s Green Tag certification for sustainable building materials.
“We are on track to recertify some of these this year and will focus on integrating all the different types of accreditations into our various operations in the coming months, along with continuous training of our employees in this respect,” Zarrebini said.
PFE’s biggest challenges in 2017 were likely to come from operating in a VUCA (vulnerable, uncertain, complex and ambiguous) environment.
“We hope that there is stability in the foreign exchange markets which make investment decisions easier and that business confidence grows during the year.” Zarrebini said. “Consumer and business confidence has an immense impact on operations and mitigating risk from a decline in confidence is likely to pose further challenges to our group operations.”
“We remain focused on remaining at the forefront of environmental sustainability in South Africa in the industries in which we operate,” he concluded, “Ultimately our aim is to generate sustainable bottom-line value whilst using resources productively and minimising our impact on the environment.”