Insimbi’s export ability, trade growth has been affected by US-China spat
Companies / 9 October 2019, 4:30pm / Sandile Mchunu
DURBAN – Insimbi Industrial Holdings recorded a single-digit growth in earnings for the six months to end August as a result of the trade war between the US and China.
The group said on Tuesday that the continuing spat downed its volumes, selling prices and margins. Insimbi is highly dependent on recycled metals exports.
The group said its export ability had been hampered by the continuing stand-off between the world’s two largest economies and stagnant growth in its home market of South Africa.
The group reported a 3.25 percent increase in profits to R35.87 million, while revenue rose 13 percent to R2.4 billion, boosted by the acquisition of Group Wreck in November last year. Insimbi acquired scrap metal recycler Group Wreck International for R120m. The group said it would continue to consider more acquisitions to prop up its profits.
It said operating profit increased 8.3 percent to R67.3m, with Group Wreck contributing R28.8m.
Earnings per share rose 3.9 percent to 9.48 cents a share, while headline earnings per share inched up 11.3 percent to 9.42c.
The group declared a gross interim dividend of 2c a share.
Chief executive Fred Botha said despite a challenging local and global economic environment and the impact of floods and labour unrest that affected Transnet operations in Durban earlier in the financial year, Insimbi has achieved decent growth on the back of the acquisition of Group Wreck in November last year.
“Commodity, and in particular metals prices, have been subdued in the first six months of the year, and it is estimated that our weighted average basket price of products is between 12 and 15 percent down on international pricing compared to the same period last year,” Botha said. “However, this has been partially offset by a weaker currency during the period under review, as the rand price of said basket is approximately 5 percent lower across the board.”
Botha said the group realised a 13 percent increase in real revenue growth, which was satisfying and lent support to the acquisitive strategy Insimbi embarked on in the last three years. Insimbi is already in the process of acquiring the Treppo Group, which operates in KwaZulu-Natal and Gauteng for an estimated amount of R109m as announced in June.
“The transaction is subject to certain conditions precedent, including Competitions Commission approval. This transaction will be value accretive and will provide further geographic expansion of the metal recycling and processing business and provide us with an even closer proximity to Durban harbour for export purposes,” Botha said.
He welcome the economic stimulus initiatives recently announced by President Cyril Ramaphosa, especially the R400 billion to be spent on infrastructure upgrades, which “will give our target markets and customers a well needed and deserved boost”.
The group expects trading conditions in the second half of the financial year to remain challenging, but was confident that its foundation was stronger and better positioned to weather the storms.
Insimbi shares rose 2.8 percent on the JSE on Tuesday to close at R1.10.