Industry News

Penrice loss but company to increase exports

However, the company said that there is a continued growth in sodium bicarbonate exports and its new Selective Salts Recovery (SSR) business.

Second half statutory losses after tax were $35.5 million compared with the first half loss of $28 million.

The company?s underlying performance improved in the second half, assisted by price rises and labour cost reductions initiated in the first half.

The significant items in the loss included an impairment of the assets of chemicals and quarry and mineral businesses, costs incurred from the South Australian Government?s temporary closure of the Gawler rail line and restructuring costs.

“As at 30 June, 2012, Penrice had net debt of $93.6 million, up from $75.6 million a year earlier, primarily due to the impact of the SA Government?s Gawler rail line closure and the weaker trading environment. Net debt to debt plus equity stood at 98 per cent, up from 53 per cent,? said Penrice chairman, David Trebeck.

“A substantial part of the funding increase was unavoidable to meet the cost of the SA Government?s unfortunate decision to close the company?s Gawler line rail access for seven months, a decision made without proper consideration of the company?s interests.?

The company indicated its business had also endured very poor demand conditions from its Australian customer base.

?Our Australian manufacturing customers are being crushed by the weight of the high Australian dollar. Our South Australian quarry customers are experiencing the worst construction decline in a generation,? said Penrice managing director and chief executive officer Guy Roberts.

?The impairment charges are direct reflections of these deteriorating demand conditions in Australia, especially for soda ash from Australian glass, detergent and other manufacturers.

?In South Australia, it reflects demand from the construction sector down more than 30 per cent, with housing construction falling progressively over the last two years to new lows.

?However, we remain determined to rebuild and transition our business from a trade-exposed supplier so reliant on Australian industry, to a value added exporter of premium sodium bicarbonate to strongly growing Asian markets and a supplier of our world first SSR technology to the Australian coal seam gas industry.?

The company is particularly encouraged with the recent progress in developing Penrice?s SSR technology.

“The new facility accommodates the extraordinarily tough trading environment in which we, along with the majority of Australian manufacturers, find ourselves,? said Trebeck.

?It also confirms that our growth strategies around sodium bicarbonate exports and SSR technology commercialisation are sound. We are grateful for the sound, long term view which the company?s banks are taking and we will continue to work closely with them.?

This SSR technology and its export business supported the improvement in performance in the second half and it will have considerable potential for growth in the long term.

Penrice said the demand outlook for chemicals and quarry and mineral businesses in Australia remains uncertain and given this outlook, no earnings guidance for FY2013 was offered.

?The board remains cognisant of the need for debt reduction and continues with the planned sale of the Angaston Mine to achieve that end and thereby place the company on a better footing to pursue growth opportunities in exports and SSR technology,? said Trebeck.

?We are pleased to have the continuing support of the company?s banking syndicate in these particularly difficult market conditions.?

An update on current trading will be provided at the company?s Annual General Meeting.

Source: Penrice Soda Holdings

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