WBHO pulls plug on its Mozambican pipe mill

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Roy Cokayne

WILSON Bayly Holmes Ovcon (WBHO) has decided to either sell or close its financially troubled Mozambican pipe mill, Capital Star Steel (CSS).

This follows the listed construction and engineering group reporting in June that it had impaired the value of CSS, which would affect its earnings a share in the year to June.

CSS is a subsidiary of Capital Africa Steel, through which WBHO runs its construction materials businesses.

The group said this week that shelving and racking businesses Symo, a division within Capital Africa Steel, and Krost Shelving were also both disposed of in the year to June.

A deal, still subject to certain conditions, had also been concluded for the sale of Dywidag-Systems International, its business that supplies roof bolts to the mining sector.

WBHO said these businesses would be disclosed as discontinued operations on September 1 when the group published its annual results.

It said the group’s headline earnings a share for the year to June would fall within a 5 percent range of the previous year’s headline earnings a share of R11.509. Earnings a share would be between 25 percent and 35 percent lower than the previous year’s R11.043.

However, headline earnings a share from continuing operations would increase by between 5 percent and 15 percent and earnings a share from continuing operations would be between 10 percent and 20 percent higher than the figures for the previous year.

WBHO advised shareholders in June that the profitability of CSS had been severely affected by various production stoppages that had continued into the second half of the year.

It said Capital Africa Steel had provided CSS with funding of R120 million to support two recovery plans but production targets had been missed and fierce competition in the international market had affected the future operations of CSS.

WBHO said the impairment had resulted from expectations that the cumulative effects of these events would result in the value of CSS’s assets being less than their carrying amount of R539m on WBHO’s books.

WBHO shares jumped 3.46 percent higher to close at R137.41 on the JSE yesterday.


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