Independent restructuring and corporate advisory firm McGrathNicol, which was appointed in April as the administrator for the Penrice Group, has said that it is seeing ?early signs of stabilisation?, with the business generating promising interest among opportunistic bidders.
Penrice employs 180 workers at its operations on the Port River at Osborne and Angaston, near Adelaide, and was placed into voluntary administration on 11 April. The company?s businesses comprise the manufacture of sodium bicarbonate and quick lime, the import and distribution of soda ash throughout Asia and the operation of a limestone mine at Angaston in South Australia. It had a turnover of $137 million in 2012-13.
At the first creditors? meeting in late April 2014, McGrathNicol partner Sam Davies presented a mixed outlook.
While the Penrice Group?s debt is still growing, current liabilities including secured creditors, trade creditors and employee entitlements total $150 million. ?But if some of the contingencies that have been raised with us (by Ridley Corporation and Flinders Ports) come to bear, it could process towards $200 million,? Davies added.
?At this stage it looks like the business is showing some early signs of stabilising but it will still take a number of weeks before we are completely comfortable that it has hit that particular point.?
Customers rallied for support
In a task he described as ?significant but not insurmountable?, Davies called on Australian businesses that supplied Penrice Soda and relied on the company for key materials should support it at this critical time.
?We see the administration as a fantastic opportunity for Australian customers to show their support for Australian manufacturing and we are pressing our customers to do more in that regard,? he said. ?Penrice is a local manufacturing business with a skilled workforce of 180 people and strong supply relationships nationally and internationally. Losing Penrice would be a blow to South Australian jobs and mean increased costs to domestic businesses that would have to source product from much further afield.
?We?ve had terrific support from a number of key customers and suppliers but it?s not a stretch to say that the future of Penrice and its employees hinges on a number of key suppliers and customers continuing to support the business at this point.?
Davies said a number of restructuring initiatives had been identified to shift the business on to a profitable footing in the very near future. However, while customer arrangements and supplier agreements were being assessed and renegotiated, changes would also need to be made to the aged construction plant at Osborne for it to be efficient.
?The plant is very aged, has been around since 1935 and there are lot of repairs and maintenance costs. One of the earlier things we are going to try and do is address that inefficiency,? Davies explained.
Davies is hopeful of securing a buyer for the business by the end of the financial year, but declined to reveal any information on the prospective bidders.
?I suspect that the interest that?s been shown has been around for quite a while waiting for the right opportunity,? he said.
The group incurred significant losses in recent years for a number of reasons, including the high Australian dollar and the high cost of manufacturing in Australia, coupled with aged and inefficient production and high debt levels.
A second creditors? meeting will be held in late July.
Sources: Adelaide Now, The Herald, ABC News, The Sydney Morning Herald, Penrice Group