Insimbi’s first half results ‘satisfactory’ and encouraging

JSE-listed Insimbi Refractory and Alloys’ earnings before interest, taxes, depreciation and amortisation increased by 273% year-on-year to R179.8 million for the six months ended 31 August 2017. Earnings a share were up by 142% year-on-year to 11.97 cents and headline earnings a share increased by 150% year-on-year to 11.95 cents.

Insimbi Refractory and Alloy Supplies presented its six month interim results to end August 2017 at the JSE recently, in the first such event since listing in 2008.

Speaking at a presentation of the company’s results in Johannesburg CEO Fred Botha said the company’s performance in the first half of the 2018 financial year had been satisfactory.

“This is our first presentation of results at the JSE, ever. We haven’t really had much to say until now,” said new CEO Fred Botha, who was appointed in June 2017.

“We are now hopefully on the path to gaining some recognition from the market,” he said.

“What started many years ago as a journey of growing a business in the refractory and alloys industry has resulted in an Insimbi that today is a diversified business in terms of industry, client base, presence and revenue. This augurs well for the future and we are well positioned to take advantage of opportunities as and when they arise. It is our intention to achieve at least a level 4 rating, on the BWBBEE Amended Codes of Good Practice at all our operations, by the end of 2018, and we are well positioned to achieve this.”

“The first half of FY18 has been satisfactory and in particular, the second quarter, was outstanding. The conclusion of the Amalgamated Metal Group Holdings (AMGH) transaction at the end of last year is now contributing positively to all aspects of the business. In the final results for 2017, we were only able to include two months of the AMGH trading in Insimbi’s consolidated results. We are happy to confirm that this business has met and exceeded our expectations as at the time of making the acquisition. The integration has been seamless and the synergies are being exploited beyond anticipation. From a commercial perspective, the AMGH transaction was concluded when copper was at US$4400pmt while it is approximately $6600pmt at the time of writing. Aluminium, chrome and iron ore prices have shown a significant upward trend since the last Insimbi report and seem to be recovering on the back of strong global demand.”

Operational overview
“AMGH volumes are up over 10% on the previous year and this, complemented by the increased metal prices, has resulted in an exceptional six months.”

“Despite a rather lackluster first quarter, Insimbi Alloy Supplies (IAS) has exceeded the comparative period last year after a very strong second quarter. Stock levels are consistently better and a renewed enthusiasm within this operation is clearly evident. The steel industry is showing signs of improvement whilst the ferrous and non-ferrous segments are showing significant growth.”

“The refractory operations are performing well although revenues are down as a result of the loss of volume but margins are trending higher. The synergies between the secondary aluminium smelters at Insimbi Aluminium Alloys (IAA) and Metlite Alloys (ML) and AMGH are becoming evident and the management teams are working effectively to benefit the Group.”

“The plastics business has shown an improved performance year-on-year and we have increased the footprint of this segment by expanding the manufacturing facility to include KwaZulu-Natal at present and will soon be established in the Western Cape. The plastics product range has expanded as well and we are slowly penetrating the rainwater harvesting market.”

Financial overview
“Group revenue for the period is R1.67 billion, an increase of 247% or R1.19 billion on the comparative period ended 31 August 2016. The increase in revenue is mainly attributable to the successful acquisition of AMGH, as well as an increase of around 11% in the revenue of the traditional pre-acquisition group of companies. As a result of the lower margins in AMGH, overall gross margins have decreased from 14% to 11% but gross profit has increased by 162% from R68.6 million to R179.8 million, an increase of R111.2 million for the 6 months ended August 2017.”

“Group operating profit has increased by 289% to R77.3 million compared to R19.9 million in the comparative period last year.”

“Group operating costs have increased by R56.2 million from R49.6 million to R105.9 million when compared with the period ended August 2016, R51 million as a result of operational costs associated with the acquisition of AMGH for the period under review. Operating costs in the pre AMGH acquisition group have increased by R5.3 million and are mainly attributable to an increase in salaries and wages. All companies within the Group are committed to cutting operating costs where possible.”

“Insimbi is well positioned for the future. Diversified products, revenue, client base and geographic location allow us to pursue our goals with the required vigour and energy. The expansion of the Atlantis, Cape Town, site to include the plastics blow-moulding and rotomoulding facilities has been completed and we will commence production in the third-quarter. This follows a successful implementation of the strategy earlier in the year at our site in Durban. This will allow us to penetrate these markets cost effectively with a superior product from world class facilities.”

“Expansion of the AMGH metal recycling footprint into KZN and Western Cape is a key focus and inroads are already being made to achieve this.”

“Major inroads have been made regarding our ambition to produce ultra-low carbon alumino-thermic ferrochrome, which will increase production volumes of aluminium in existing plants and provide us with a high value beneficiated chrome product for the local and export market. We are under cautionary with another transformative transaction being explored, which we hope to conclude in this financial year. We believe this transaction will be value accretive and bring further diversification and value added opportunities to Insimbi.”

“We are continuously looking at how we are able to achieve the impossible and as such we are focusing on exploiting under performing assets, maximising synergies and ensuring appropriate cost management across all the business segments.”

“We believe that the Group is well positioned to continue to deliver on the promise reflected in the above results. You can’t expect the rate of growth to be maintained. But I expect impressive niche market growth,” he said.

For more information contact Insimbi Group of Companies on TEL: 011 902 6930 or visit the website