According industry talk one was waiting to happen and the other one is a real shock!
It is with disappointment to announce that RelyIntraCast, one of the leading investment castings companies in South Africa and Naledi Foundry Operations, one of the oldest and largest ferrous foundry operations in South Africa, have both been placed in business rescue during April 2022. They join Cast Products South Africa, South Africa’s biggest foundry group, which was placed in business rescue officially in January 2022.
Business rescue involves proceedings to facilitate the rehabilitation of a company that is financially distressed by providing for the temporary supervision of the company, and of management of its affairs, business and property and a temporary moratorium on the rights of claimants against the company or in respect of property in its possession.
The primary objective of business rescue is the development and implementation of a business rescue plan that either rescues the company by restructuring its affairs, business, property, debt and other liabilities and equity in a manner that maximises the likelihood of the company continuing its existence on a solvent basis, or if that is not possible, results in a better return for the company’s creditors or shareholders than would result from the immediate liquidation of the company.
Naledi Foundry has recently spent over R100 million on new equipment. This includes two new IFM 7 multi-function furnaces with twin-power systems supplied by ABP Induction
The business rescue practitioners that have been appointed are always positive that they can save the company for good reason – their fees are relatively lucrative and they certainly want to protect their interests and get as much out of the situation as possible. Their statements are usually: “In light of the various engagements with the affected persons, it is my view that, notwithstanding inevitable risks and challenges, there is a reasonable prospect of rescuing the Company.” Creditors come second in all cases.
Like Cast Products South Africa speculation about Naledi Foundry has been around for some time. This is despite the GF horizontal moulding line being completely overhauled, the installation of two new IFM 7 multi-function furnaces with twin-power systems supplied by ABP Induction Systems.
There was also the installation of a 11 ton pouring furnace Presspour type OCC that is used for holding and the automated inline pouring of ferrous and other metals when required, also supplied by ABP Induction Systems, the installation of a Nederman MikroPul FS cassette type filter, that has a capacity of 77 500 m3/hr, for the extraction of raw gas and dust from the two 10 ton induction furnaces and the SG magnesium converter, a new big bag system for collection of dust on the Nederman MikroPul dust extraction and filtration system, the installation of an Endeco Omega Sinto CB 30 coreshooter in the core shop and a two-ton an hour Endeco Omega Sinto continuous mixer and the commissioning of a state-of-the-art gas fired heat treatment plant that includes quenching and tempering of cast grinding media.
The plan announced by Naledi Foundry was that the company wanted to increase capacity, improve quality and diversification, these were the pillars of its strategic blueprint. In order to achieve this the foundry embarked on a restructuring process that included investment in new equipment as part of an approximate R100 million investment programme in the foundry, formerly known as Guestro Casting and Machining that has origins dating back to 1912.
Naledi Foundry acquired the business of Dorbyl Limited when it entered into an intergroup purchase transaction on 20th May 2016. The assets and liabilities were acquired at their carrying amounts at the balance sheet date. The business manufactures spheroidal graphite and grey iron castings for the automotive, mining and general engineering sectors.
According to the business rescue documents distributed shareholding is made up of IDC 65% and Sibusiso Maphatiane 35%. At the commencement date of the business rescue the company employed approximately 211 employees.
Reasons given for the financial distress are no different to many others that have applied for business rescue.
Debt obligations
This is the astounding fact. The business rescue practitioner has stated that at the time business rescue proceedings started the company has the following debt obligations:
IDC (Shareholders and Quasi equity loans): R536 979 463
Shareholders Loans: R354 764 379
Ekurhuleni: R100 000 772
SARS: R9 518 675
Trade Creditors: R21 334 169
Others: R16 927 399
Total: R1 039 524 857
Again it will be a great loss to the South African foundry industry if the company is put into liquidation, especially if you consider how much money was spent on good equipment but still it was not able to operate in profit.
RelyIntraCast
The Companies and Intellectual Property Commission (CIPC) notice actually says the company name is Rely Precision Castings. The application for business rescue was duly registered on 21/04/2022 and the effective date of commencement of business rescue proceedings is recorded as 21/04/2022.
Rely IntraCast, which is one of the four investment casting foundries in South Africa, has recently been the subject of a business rescue
More than this application notice there is not much information that is readily available, even after trying to contact the Directors. In 2017 RelyIntraCast, Walro Flex and Elgin Flameproof were the basis of a MBO by the management of these companies and Intakobusi Holdings (Pty) Ltd was formed as the holding company.
Walro Flex was a leading manufacturer of automotive cables and had been run very successfully since its establishment in 1969. Subsequent to the MBO the company got into difficulties and went into business rescue in December 2020. Unable to be saved a court order finally put the company into liquidation on the 20th December 2021.
This judgement has obviously had an adverse effect on the other two companies in the group.
Cast Products South Africa
Apparently a draft rescue plan has been drafted, outside consultants have been appointed and the plan is in the process of being implemented. Besides many management and process issues to sort out, one of the first priorities should be to sort out the scrap issues. It is said that at times the company would run at close to 100% scrap rate but according to reports these levels have been recorded at 10% in the non-wheel foundry and 47% in the wheel plant. No wonder the company was in distress.
