Hudaco leverages on its strengths


With all the drama of COVID lockdowns, China’s production backlogs, supply chain constraints, July civil unrest, a crippled Durban port, NUMSA strikes and loadshedding; Hudaco thrived!

Hudaco’s 2021 gross profit margin was 37% (pre-Covid 2019 gross profit margin was 36%) yet the cost of shipping a container increased ten-fold the pre- Covid cost. Their suppliers increased prices of their products due to supply chain constraints, high commodity prices and product shortages. Hudaco’s whole supply chain faced inflationary pressure, which would have ultimately squeezed their margins if it was not for their astute management of their entire value chain to keep them “a step ahead” and  improve margins.

Hudaco leveraged off their strengths and relationships which centered around their inventory management. One of their main strategies was to increase their stock levels, they did this by increasing their stock early in the year by one month of sales, this prevented stock outs and they had inventory on hand when their competitors did not, luring customers away from their rivals. 

By ordering higher levels of inventory, they could negotiate a better volume supply from their suppliers and due to solid relationships Hudaco was prioritised even when the supplier faced their own stock constraints. 

Hudaco imports a vast spectrum of products from generic to highly specialised products. Some of their products are price inelastic because there are few or no substitutes for the product and the customer considers the product essential in their business so Hudaco easily passes its costs onto the consumer. 

In this current inflationary environment, it is a rarity to find a company able to pass on their costs to their customer and still grow market share – Hudaco achieved both!

Comments

Post a Comment

Popular posts from this blog

Three ways to teach kids about money and investing using Checkers Little Shop collectibles

Image
Kids learn best through play. You don’t have to spend money on expensive toys and games to teach your children money and investing skills. The Checkers Little Shop promotion is now over and before the little collectibles end up at the bottom of the toybox or even worse in a landfill, here are three games you could play with your kids and have fun teaching them about money and investing at the same time:  Needs vs Wants   One or more players  Age : 4+ Take an empty pillow case and dump all the Little Shop objects inside. Let your child pull out one Little Shop and say whether the item is a need or a want. If they are correct, they get to keep the item. If they are wrong, they have to put the item back into the pillow case. The child with the most Little Shop items at the end of the game, when the pillowcase is empty, wins the game. The learning outcome of this game is to help your child distinguish between needs and wants; a very important building block in the foundation ...
Read more

Transpaco - a JSE microcap to wrap your head around

Image
There is a microcap listed on the JSE, that you might not know about, but you most likely handle one of their products every single day…let that sink in…Every. Single. Day.  From grocery packets, dustbin bags, cling wrap, Sellotape and pharmaceutical boxes; it is difficult to fathom how much this small cap is intertwined into our daily South African lives.  This week I am delving into Transpaco - a family run multi-million Rand business boosted with a majority black empowerment shareholder that is a trade union ( nogal! ) that quietly sticks to its knitting in the plastics and paper packaging industry. Transpaco offers the investor a great defensive play in consumer and industrial markets because even through the hardest of lockdowns, two years ago, their business did not shut down as it was deemed essential services. Not only did they NOT shut down during that period, but they were able to effortlessly add a whole product line of personal protective equipment (PPE) which pigg...
Read more

Orion's copper belt

Image
In Greek mythology, Orion was a hunter; a very fitting name for the junior miner, Orion Minerals, as they explore South Africa and Australia in search of new mineral deposits.  Armed with new mining and drilling technology, Orion discovered one of the world’s top volcanogenic massive sulphide (VMS) base metal deposits, a copper belt in the arid Northern Cape, that has the potential to deliver 226kt of copper and 680kt of zinc from an old AngloVaal mine where gold was mined three decades ago. This is the Prieska Copper – Zinc project which consists of an underground and open pit mine.  The initial plan was to start mining the underground mine and only start mining the open pit mine in 13 years’ time.  Currently, copper prices are extremely strong, almost $10,000 per ton, due to this Orion decided to re-assess their initial plans and rather accelerate the feasibility study of the open pit mine and have an investment decision by mid-2022. If Orion decides to go ahead to star...
Read more