Diversification and optimised efficiencies realise strong results for Insimbi

Foundry division performs well despite the naysayers in the industry and continued competition both locally and from abroad.

JSE listed Insimbi Refractory and Alloy Supplies has released a stellar set of results for the six month period ending 31 August 2015. The results were better than expected given the difficult trading conditions that have affected the steel industry in South Africa.

Insimbi is principally a supplier of ferrous and non-ferrous products and commodities. However, the company has over time diversified into a number of different fields with product lines now including ceramic bricks/linings, aluminium alloys, chemicals, technical textiles, kiln realignment and mechanical preventative services, and more recently the plastics converting segment with the purchase of Polydrum (Pty) Ltd.

Insimbi, a South African based company, is engaged in supplying the steel, aluminium, cement and foundry industries with resource-based commodities like ferrous and non-ferrous alloys, as well as refractory materials, sourced locally and from abroad, by integrating the supply, logistics and technical support function. The steel segment focuses on the supply of a range of alloys, including non-ferrous alloys, to the steel and stainless steel industry. The foundry segment focuses on the supply of a range of alloys and ancillary raw materials, including foundry sand, ceramic ducting, to ferrous and non-ferrous foundries, including heavy-duty foundries, automotive foundries, and electroplating specialists. The refractory segment is engaged in the supply of ceramic refractory linings to the cement, paper and pulp, steel and platinum industries.


Insimbi have commissioned a more modern and efficient smelting facility at their Benoni operation. The current primary melting furnace, which is a reverbratory furnace, is being converted into a holding furnace. In its place Insimbi have imported a gas fired tilting rotary furnace with a five ton capacity. Besides the efficiencies that Insimbi will obtain, production capacity will be ramped up to 30 tons a day, which is a 20% increase on the current situation. It also gives Insimbi the opportunity to process their own dross

The company, which listed on the AltX in 2008, moved to the main board in January 2012. At the time of the move Insimbi said the move would expand its options for raising capital and the listing would open up “exciting opportunities”.

“In challenging global markets, Insimbi has been pragmatic in positioning itself, notably in the foundry and refractory segments, to achieve increasing profit and return for shareholders, seen in our increase in revenue of 7.5% for the period. Our reliance on the beleaguered steel sector has reduced considerably and we have effectively reached a level of sustainability,” said CEO Pieter Schutte.

“Furthermore, we have continued to optimise efficiency in all of our divisions, especially at our secondary aluminium smelters as we seek to define new markets for our aluminium products. Before year end, we will have commissioned an upgraded smelting facility at our Johannesburg operation.”

“The Company also looks to expand on not only our core segments but also in our Nano Milling paint based products, with the appointment of an experienced quality technician, as well as the plastics segment with the acquisition of Polydrum (Pty) Ltd, which has provided additional cash flow to our increasing revenues.”

“As our focus moving forward remains on the businesses fundamental resilience by reducing working capital and operational costs as well as strengthening our relationship with current suppliers, management will also be looking at ways to expand on current incremental profit and I look forward to updating the market on further opportunities in the future.”

Operational overview
“The foundry segment has performed well generally and despite continued competition both locally and from abroad, it achieved revenue of R366.8 million, a 4.5% or R15.7 million increase on the previous period under review. This segment is traditionally a “barometer” of how well the economy is doing and it appears to have reached a comfortable level of sustainability. A change in product mix coupled with a weaker currency, has helped lift margins.”

Upgrade at Benoni secondary aluminium smelter
“The two secondary aluminium smelters, which form part of this segment, have been operating much more efficiently although they have been faced with a lower order book as a result of the challenges facing the steel industry. We are actively looking for other markets for our range of aluminium products and with a weaker currency, there are opportunities in the export market but raw material, energy and logistic costs remain a challenge when competing with overseas producers.”

“Nonetheless we are in the process of commissioning a more modern and efficient smelting facility at our Benoni operation, and we are confident that this will improve our operational efficiencies and recoveries to the degree necessary to enable us to export competitively.”


Insimbi’s secondary smelter manufactures and supplies aluminium alloy ingots

“The current primary melting furnace, which is a reverbratory furnace, is being converted into a holding furnace. In its place we have imported a gas fired tilting rotary furnace with a five ton capacity. Besides the efficiencies that we will obtain production capacity will be ramped up to 30 tons a day, which is a 20% increase on our current situation. It also gives us the opportunity to process our own dross.”

“Additionally we have upgraded the baghouse at the facility. This upgraded facility should be operational by no later than the end of November 2015.”

“It seems that every year we make mention of the challenging economic conditions facing businesses in South Africa, and yet Insimbi continues to not only survive but flourish, and we continue to seek and find opportunities that help us grow. This year is proving to be no different and while businesses are still faced with significant challenges, the board and management of Insimbi are optimistic that as in previous years, opportunities will continue to present themselves, and that we will be able to take advantage of them for the benefit of all our stakeholders.”

“We remain confident that our government will react positively and promptly to ensure that our strategic South African assets, particularly in the steel and resource sectors, are given the opportunity to stabilise in the short term and return to operational and economic viability in the medium term. This confidence is supported by the recent implementation on import duties on certain grades of steel being imported into South Africa. A similar request for import tariffs on certain aluminium products has recently been made by Hulamin Limited. We hope that these initiatives bring the stimulus these industries require as it will benefit not only those industries directly, but all their suppliers and other stakeholders. Insimbi is one of them.”

Foundry sector
“Despite all the naysayers the foundry segment has shown tremendous resilience over the past few years and while foundries have closed, those that have not have grown stronger, more efficient and are becoming even more resilient. The foundry segment is very much part of our core business and we will continue to service this segment with the recognition it deserves.”

“The refractory segment is another core segment and, like the foundry segment, has proven it’s resilience over the past decade. Recently, the cement players in this segment have been successful in getting ITAC to implement import tariffs on cheap cement, which has, for a long time, been imported into South Africa at the cost of our local industry. The impact has not filtered through yet but we are optimistic that when it does, Insimbi will be ready to meet the increased demands made on us by the cement industry.”

“As mentioned earlier, the secondary aluminium smelters are running optimally and our investment in new furnace technology will hopefully improve our recoveries. The commissioning of this upgraded plant is imminent. Scrap supplies have become much more consistent with respect to both quality and price. This can in part be attributed to the ITAC regulation implemented in 2013/4 which monitors and regulates the issuing of export permits to the waste metals industry.”


Insimbi’s secondary smelter manufactures and supplies aluminium alloy pellets

“In July, we acquired a 75% stake in Polydrum, a manufacturer of durable plastic products, for R9.4 million. The acquisition of Polydrum has been an interesting one and we see the potential for this low mass high volume operation. Capital expenditure has already been approved for the installation of two extra manufacturing lines and we will be expanding our reach into the rest of South Africa. Polydrum earned revenue of R2.9 million and gross profit of R1.1 million in the first month of inclusion in the interim results.”

“Currently about 85% of our business is generated from within South Africa. Going forward more attention will be given to our bordering countries and the North and West African countries to increase our presence in these countries.”

“The strategy of management to diversify our product offerings and services over the years has certainly put us in a positive position, and as said previously we will continue to look for opportunities.”

Changes to the Board of Directors
Daniel O Connor retired as chairman and non executive director of Insimbi at the Annual General Meeting (“AGM”) which was held on 25 June 2015. Mrs Lerato Okeyo was appointed as independent chairman of the Board effective the same day. Mrs Cleopatra Shiceka was appointed as non executive director to the board on 7 July 2015, as well as chairman of the Audit and Risk Committee.

For more information contact Insimbi Group of Companies on TEL: 011 902 6930 or visit the website www.insimbi-alloys.co.za