Insimbi earnings plunge 54%, hurt by SA decision to curb metal exports

Insimbi Steel Division alloy supplies specialises in the supply of industrial consumables to a wide range of markets. SUPPLIED

Insimbi Steel Division alloy supplies specialises in the supply of industrial consumables to a wide range of markets. SUPPLIED

Published Jun 3, 2024


INSIMBI Holdings on Friday said that South Africa had made little progress in resolving key infrastructure challenges hobbling mining and industrial sectors, with these critical gaps worsening an operating framework characterised by a dip in prices for some commodities.

This comes as the company’s operating profit fell by 38% to R123.2 million for the year ended 29 February 2024, largely affected by the government’s decision to curb exports of ferrous and non-ferrous scrap and waste metal.

Insimbi sources, processes, beneficiates and recycles ferrous and non-ferrous metals.

“The South African government allowed the ban on exports of ferrous and non-ferrous waste and scrap metal to expire in December 2023. For Insimbi, the ban primarily impacted our ferrous division,” Insimbi said on Friday.

The company said it had been able to adapt and manage the new regulatory move, attributable to the diversified nature of the group.

However, with South Africa still facing port, rail, water and electricity bottlenecks, Insimbi chairperson Robert Dickerson said the company had not been spared the impact of this.

“South Africa has made scant headway on its critical infrastructural challenges,” Dickerson said.

Apart from port and logistical challenges, Dickerson said Insimbi was also affected by the “effects of lower-than-expected commodity prices, high interest rates, protracted periods of load shedding, and the ban on exporting” recycled metals.

During the full year period under review, revenues in Insimbi dipped by 2% to R5.5 billion, resulting in headline earnings per share (Heps) for the year plunging 54% to 12.54 cents.

With cash from operating activities down by 22% at R101 700, operating costs in the company were 6% lower compared to the previous year as employee costs reduced by R14m.

However, finance costs for the period rose from R59m in the prior year to R73m “as a result of high interest rates” throughout the financial year.

Trade and other receivables as at the end of February amounted to R637m, up from R609m, with the average trade receivables days increasing from 37 days to 39 days.

Furthermore, as much as R22m had been released by Insimbi customers before year-end but “due to a glitch in the banking systems”, only reflected in the group’s bank accounts after year-end.

A total of R65m was paid and received within 24 hours of year-end.

Inventories at year-end amounted to R335m compared to R305m.

“This increase is a result of importing product, as some products are no longer being produced locally, coupled with delays in shipping and the impact of the exchange rates on the value of products,” the company explained.

Net working capital for the period increased to R672m compared to R634m the previous year.

Insimbi paid off an interest-bearing debt of R40m but also bumped up its working capital facilities, resulting in an increase in net debt of R9m.

“The increase in working capital facilities were necessitated by the ban on exports,” the company said.

Insimbi is continuing to focus on supplying recycled and beneficiated ferrous and non-ferrous metals for local and export clients.

It is seeing continued support for higher copper and aluminium prices from “the global focus on decarbonisation and vehicle electrification” projects and programmes.

However, prices for most of the company’s commodities declined during the period under review although the impact on Insimbi’s export and local revenue was partially mitigated by the US dollar base pricing of these commodities and an exchange rate that worked in its favour.

“Cleaner metals are the cornerstone of our business, and we continue to find an appropriate balance between maintaining sales and rising raw material costs,” it said.