Sale of WBHO’s Mozambique pipe mill draws closer

capital star steel

The finalisation of the sale by Wilson Bayly Holmes-Ovcon (WBHO) of its financially troubled Mozambique pipe mill, Capital Star Steel (CSS), is imminent.

The listed construction and engineering group has also concluded an agreement to sell 3Q Mahuma Concrete Holdings, a subsidiary of Capital Africa Steel (CAS).

WBHO decided in 2014 to sell CSS, also a subsidiary of CAS through which the group operated its construction materials businesses, after it made a trading loss of R65 million in the year to June 2014.

The group at the time attributed the problems experienced by CSS to the slower growth in the Chinese economy, which had resulted in an oversupply of pipe within the global market.

WBHO said yesterday that the documentation required to finalise the sale of CSS had been agreed and the signing of this agreement was imminent.

The group’s construction materials business now consists only of the steel reinforcing business within CAS.

It did not disclose the identity of the purchaser of CSS, but said that the disposal came with a net loss of R66.24m.

The group in the year to June impaired the carrying value of the CSS factory by R360m.

WBHO said yesterday that the agreement concluded in the six months to December for the sale of 3Q Mahuma Concrete Holdings remained subject to certain conditions precedent and would likely only be finalised towards the end of the second half of the group’s financial year. The identity of the purchaser or the acquisition price was not disclosed.

The imminent sale of these two businesses follows WBHO in 2014 classifying four operations within the construction materials business segment as discontinued operations.

Symo Steel, a division of CAS, and Krost Shelving were disposed of for a loss of R40m, while a sale agreement was concluded for Dywidag Systems International, a supplier of roof bolts to the mining sector.

WBHO yesterday reported an almost 17 percent growth in headline earnings a share to 632.1c in the six months to December from 540.9c in the previous corresponding period.

Revenue rose by 6.9 percent to R15.4 billion from R14.4bn.

Louwtjie Nel, the chief executive of WBHO, said the revenue increase was largely due to growth of 19 percent from Australia, while revenue from the African operations had declined by 5 percent.

Operating profit was 22.4 percent higher at R469.1m from R383.4m as the operating margin improved to 3.2 percent from 2.7 percent.

Nel attributed the operating profit growth largely to an improved performance from Australia. Cash generated from operations declined by 11 percent to R952.7m from R1.07bn.

An interim dividend of 135c was declared, which is almost 23 percent higher than the 110c declared in the previous corresponding period.

The order book declined to R35.4bn in December from R37.4bn in June 2014.

Nel said this reflected the 6 percent decrease in the Australian order book and a 17 percent decrease in the roads and earthworks order book, with the building and civil engineering order book remaining essentially static.

Nel said a healthy project pipeline for building work in South Africa continued to exist across all sectors and regions.

The share price in WBHO gained 3.88 percent to close trade at R134 on the JSE yesterday.

Source: IOL