The board retained a conservative approach to distributions, declaring a final dividend of three cents per share. Keeps cash back for leveraging of further acquisitions.
In the June 2018 issue of Castings SA it was indicated that JSE-listed Insimbi Refractory and Alloys Supplies expected an improvement of between 55% and 65% in both earnings per share and headline earnings per share, according to a SENS announcement. The actual release of the company’s year-end results at the end of May 2018 was too late for publishing in the June 2018 issue. However, these improved results have now been confirmed in the official channels of communication and in subsequent interviews.
The company’s revenue grew by 160% from R1,3 billion to R3,5 billion. Although they had lower margins from the recycling business (Amalgamated Metals Recycling) gross profit rose to R345,4 million from R185,8 million and operating profit climbed to R127.8 million (2017: R54.4 million), in the year under review. Insimbi also reported a 142% hike in net profit to R71 million, with cash generated from operations up 85% to R164 million, while headline earnings per share grew to 18.45 cents per share (2017: 10.87 cents per share).
Market and prospects
According to the SENS announcement the company said: “Whilst we are looking forward to the positive impact on the local economy of the interventions by government in attracting foreign investment, we expect trading conditions to remain challenging in the coming year. We will continue to monitor operating expenses and ensure we are able to maximise efficiencies and scale where appropriate. The diversification, which the group has implemented over recent years, combined with hard work and cost optimisation should ensure another successful financial outcome for 2019.”
Speaking after the release of results, Insimbi CEO Fred Botha said there were acquisition opportunities that had been presented to the company: “There was a time when we were knocking on doors for new opportunities, but these days people are knocking on our door.”
Botha said that Insimbi would be adding a significant value uplift to its chrome and aluminium businesses when it starts supplying powder-makers with a lower-grade aluminium content powder.
The foundation business of Insimbi, however, experienced a challenging year in the steel industry with local raw material supply having to be replaced by imports in a weak rand:dollar exchange rate environment and requiring settlement in advance or on delivery, the company noted.
“The local steel industry was also under pressure from cheaper imports of finished product from the East and subdued spend on infrastructure and a sluggish economy. The US/China trade spat also affected Insimbi’s operations, but has opened up several possible opportunities for the group,” added Botha.
The aluminium smelter business, meanwhile, experienced a healthy 20.6% growth in turnover, while the company’s plastics business turnover grew by 29.6%.
“Growth in plastics will remain a key priority moving forward,” said Botha.
Despite a comparable trading period in the second half of the year, lower margins impacted on the second half of the year’s profitability.
Insimbi provides the steel, aluminium, cement, foundry, plastics, paper and pulp industries with resource-based commodities such as ferrous and non-ferrous alloys as well as refractory materials.
The business has developed over the years and Insimbi operates within four distinct segments: Ferrous alloys, non-ferrous alloys, refractory materials and plastics.
According to Insimbi, the four segments complement each other and give the business model of the company a built-in diversification, which has proven to be strong and sustainable through different commodity and trading cycles that the company has experienced over their operational life.
“The most significant change was the company’s improved debt to equity ratio, which improved to 55% from 91% in the prior year. This equates to R78 million of debt settled in the period,” said Botha.
Owing to these positive results, Insimbi declared a final dividend of three cents a share.
This, Botha said at the results presentation, is an “exceptional achievement in the current economic climate and allows Insimbi the flexibility and ability to source, review and execute on opportunities.”
This was the 10th year since the company had first listed. Insimbi listed in March 2008, initially on the JSE AltX board, before migrating to the Non-Ferrous Industrial Metals sector on the Main Board of the JSE in January 2012.
For more information contact Insimbi Group of Companies on TEL: 011 902 6930 or visit the website www.insimbi-alloys.co.za