The lockdowns of the past year triggered my decision to renovate my home. I'm among the many people forced to spend many hours in my study during the pandemic. The extended homestay, which naturally leads to the desire to enhance one’s environment, helped companies whose business involves home improvement. Air conditioner maker Tadiran, controlled and run by Moshe Mamrud, is one such company.
Tadiran published on Monday its 2020 financial resutls, posting record numbers, with revenue jumping by 16%, nearing almost NIS 1 billion, while the EBIDTA and the operating profit rose by 46.8% and 55.4%, respectively. The net profit rose by 42.6%, totaling slightly more than NIS 100 million for the first time in the company’s history.
“The increase in the group’s revenues was due mainly to volume and value increase in air conditioners’ sales. During the period covered by the statements, the air conditioners sector accounted for record volume and value air conditioners’ sales compared with the similar period in previous years,” says the board’s report to the shareholders. These words appear time and again, in different wording, across the report as an explanation to the increases, an answer that makes sense, of course.
But what about Covid-19? “As at the time of the report, Covid-19 and its implications had little impact on the company’s business and results,” says the report. However, it seems Covid-19 did impact the results. In fact, it provided them with a significant tailwind.
According to the Construction Contractor Federation, the renovation sector totals arouns NIS 15 billion a year. The household market accounts for approximately one-third of this amount, with the rest going to the institutional market. Renovation is a broad name for a broad market discipline. As evident from Tadiran’s results, many decided to buy a new air conditioner, at the least, so why not write that Covid-19 helped the business?
Covid-19 has become synonymous with a host of ailments. It causes the death of millions, left a grave mark on the real economy, made businesses go under and left hundreds of thousands in Israel without a job. On March 8, 2020, one week before Israel imposed the first lockdown and when the pandemic dimensions were just becoming apparent, the Israel Securities Authority demanded of listed companies to inform investors on the impact Covid-19 had on their operations.
ISA stipulated, “Corporations whose business activity is influenced or might be influenced materially by the event should make sure they disclose the impact to the investors.” ISA went on to explain that “disclose” means “A disclosure in the board’s explanation, in the financial statements, on the impact the spread of Covid-19 had on the corporation, including its financial position, results of operations, liquidity and financial soundness, sources for funding and ability to meet its obligations, the status of the business, and plans and actions the corporation plans to take to address the risks and exposure associated with the impact." ISA further requested “a reliable quantitative and qualitative estimate of the event on the business, to the extent possible.”
It is natural for the regulator to be concerned about harm to the investors and for companies to avoid upsetting the regulator by providing insufficient or mistaken information. For this reason, many companies disclosed the adverse impact, or its lack, even though ISA did not specify that a comment is needed only in case of an adverse impact.
Covid-19 is not the only factor behind Tadiran’s fantastic results. There are more reasons. However, Covid-19’s contribution to the results must not be ignored. This is exactly one of those cases where one can say “thanks to the Coronavirus”, not just “in spite of the Coronavirus."