Johannesburg - South African steel and vanadium producer Evraz Highveld said on Wednesday it was unable to borrow more money after it posted a loss for the second straight year, and said there was doubt about the company's future as a going concern.
Its balance sheet showed it had a net cash position of 7 million rand at the end of December.
“There are matters that may cast significant doubt about the ability of the company to continue as a going concern,” the company said.
Its plight highlights the impact on industry of South Africa's volatile labour situation as the company struggled last year to recover from a crippling 4-week strike in 2012.
Smaller producers such as Evraz, which has a market capitalisation of about 1.7 billion rand, are vulnerable to the major labour disruptions which have become endemic in Africa's largest economy, as well as to climbing wage bills and power costs.
“The domestic economy remains under pressure of electricity supply concerns and notable energy tariff increases, which adversely affects the competitiveness of the domestic steel industry,” the company said.
“Labour stability, health of the market and production stability continue to pose a threat to the operations of the company and the ability to generate profits,” it said in its annual results statement.
The group said its credit lines were “fully drawn and may not be sufficient to support the company if the company cannot achieve its production and sales and cost targets.”
Its operating loss narrowed to 293 million rand from a loss of 854 million rand in the previous year, and its headline loss per share was 153 cents.
Its share price has slipped 12.81 percent this year compared with the 16.17 percent rise of the All-share index. - Reuters