Insimbi agrees on share repurchase and disposal scheme with subsidiaries

Earnings down for year ending 29 February 2024 – hurt by government decision to curb metal exports.

JSE-listed Insimbi Group has agreed on a share repurchase and subsidiary disposal schemes with some of its wholly-owned subsidiaries that include Amalgamated Metals Recycling, Amalgamated Metals Recycling West Rand, and Spring Lights 1135, among others, according to a company SENS notice of 21 June 2024 and newspaper reports.

The company sources, processes, beneficiates and recycles ferrous and non-ferrous metals, and said recently that it had been affected by the government’s decision to curb exports of ferrous and non-ferrous scrap and waste metal.

In 2016, Insimbi acquired shares in Amalgamated Metals Recycling (AMR), Amalgamated Metals Recycling SA and Amalgamated Metals Recycling West Rand with the intention of creating a larger, more diversified company which would become a more significant player in the recycling sector.

The company said that “due to the underperformance of the AMR Booysens Business and the AMR WR Business, Insimbi believes that the disposal of the business assets in terms of the AMR Booysens Disposal and AMR West Rand Disposal is in the best interest” of the company.

The company sources, processes, beneficiates and recycles ferrous and non-ferrous metals

At the same time, Insimbi is carrying out a share repurchase scheme that it deems as an appropriate allocation of capital, with the impact of the repurchases and the cancellation and delisting of such repurchased shares expected to enhance the net asset value per Insimbi share.

“The reduction in the number of issued shares will also have the effect of increasing the holdings of the company’s existing shareholders,” the company said.

The share repurchase programme in Insimbi’s Crimson Clover subsidiary is inter-conditional with the disposal by Amalgamated Metals Recycling and Amalgamated Recycling SA’s business assets used in connection with the scrap metal trading business.

This scheme will be used to settle the purchase consideration due in terms of the Amalgamated Metals Recycling Booysens disposal.

“The aggregate repurchase consideration, payable by Insimbi in terms of the repurchases, is R43 million which will be funded by Insimbi from its available cash resources and facilities, comprising of the aggregate repurchase consideration payable by Insimbi to the Crimson Clover shareholders, the aggregate repurchase consideration payable by Insimbi to the Casterly Rock shareholders, and the aggregate purchase consideration in terms of the AMR Booysens Disposal is R5.6 million payable in cash,” noted Insimbi.

The purchase consideration in terms of the Amalgamated Metals Recycling West Rand disposal amounts to R24.3 million. This brings up the sum proceeds to be received by Insimbi from the disposals to R30 million.

In June 2024, Robert Dickerson, the chairperson of Insimbi, said South Africa has 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.

“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 earlier.

However, the company has been able to adapt and manage the new regulatory move, attributable to the diversified nature of the group.

With South Africa still facing port, rail, water and electricity bottlenecks, the company has not been spared the impact of this.

Insimbi earnings down for year ending 29 February 2024 – hurt by government decision to curb metal exports
In its SENS final results February 2024 notice Insimbi Holdings has reported 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.

“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.

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.

Insimbi Alloy Supplies specialise in the supply of industrial consumables to a wide range of markets

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 dropping 54% to 12.54 cents.

With cash from operating activities down by 22% at R101.7 million, operating costs in the company were 6% lower compared to the previous year as employee costs reduced by R14 million. However, finance costs for the period rose from R59 million in the prior year to R73 million as a result of high interest rates throughout the financial year.

Insimbi paid off an interest-bearing debt of R40 million but also bumped up its working capital facilities, resulting in an increase in net debt of R9 million. “The increase in working capital facilities were necessitated by the ban on exports,” the company said.

Trade and other receivables as at the end of February amounted to R637 million, up from R609 million, with the average trade receivables days increasing from 37 days to 39 days. Further to this R22 million 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 R65 million was paid within the first 24 hours of financial year-end.

Inventories at year-end amounted to R335 million (2023: R305 million). 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. Net working capital (Trade and other receivables plus stock – trade and other payables) increased to R672 million from R634 million in 2023.

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.

Prices for most of Insimbi’s commodities declined during the year. 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 the company’s favour. The global move to cleaner production and cleaner metals is steadily gaining traction. “Cleaner metals are the cornerstone of our business, and we continue to find an appropriate balance between maintaining sales and rising raw material costs.”

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