Hudaco Industries

Step 3:

This term I have been allocated a South African firm named Hudaco Industries. They are a firm that supplies automotive parts, power tools, batteries, security equipment and communications equipment amongst other items to the African market. They have a personable relationship with international manufacturers and stock well-known brands such as Makita, Mercury, Bosch and Ironman 4×4. As soon as I realised my firm was based in South Africa, I felt apprehensive. How was I going to be able to fully comprehend their financial statements when they are in a different currency? I guess the main element would be for the firm to make a consistent profit each year, so it doesn’t matter which currency the figures are in.

While reading about the firm’s highlights in its Integrated Annual Report for the year ending November 2018, I noted that turnover was up by 8%, but operating profit was down by 3%. It made me wonder why this had occurred. Were their operating expenses too high? Also, why is the period from 1 December 2017 to 30 November 2018? Is this the standard financial year in South Africa? Their return on equity was 16%, which is fair.

Hudaco kept more than 230,000 lines of inventory in order to be able to supply upon customer demand. This is one of the firm’s main selling points. Further into the report I discovered that the currency in South Africa, the Rand, had weakened by 33% against the US$ and was volatile a lot of the time. Due to importing most of their inventory, that would explain why Hudaco’s operating profit was down. It was also stated that they were unable to increase product prices to match the downturn in the Rand.

In the joint report from the Chairman and Chief Executive it was stated that the future success of the firm rides on the election in May 2019 and for the economy to grow. Political tension seems to have a huge impact on firms in South Africa. Despite what Hudaco’s strategic focus is, the economy is going to determine the financial outcome of the firm.

The term BEE comes up frequently in the annual report. I was intrigued to find out what this term actually meant. It stands for Black Economic Empowerment and Hudaco had a level 3 rating. The benefits of this rating resulted in business won, customers retained, and it also attracts potential acquisitions.

The Total Comprehensive Income was down from the previous financial year. This was mainly due to an increase in operating expenses. I noticed in the Balance Sheet that the Total Assets had increased along with equity, loans, taxation and trade and other payables increasing.

I am happy with the firm I have been given this term. I feel that it will be interesting learning how a firm from another country operates. Hudaco is definitely different to my previous firm of Novogen, who relied on funding and grants as their revenue. It has been easier for me so far, to read Hudaco’s Annual Report than when I first learnt about financial statements in ACCT11059, although there is still so much to learn and understand.

http://www.hudaco.co.za/

A few of the different companies that Hudaco Industries own have their own websites. I have listed a few below:

http://partquip.co.za/

http://www.deutz.co.za/

http://www.rutherfordmarine.co.za/