Steel-based beneficiation group Argent Industrial on Thursday reported a R106-million operating profit for the year ended March 31, up from R91-million in the prior year.

The JSE-listed company said this was despite its manufacturing division being adversely impacted on by the downturn in the South African economy and the improvement in the South African exchange rates.

Argent further noted that the group’s main brands performed to expectations while the steel furniture and the Jetmaster divisions showed negative returns. Cedar Paint, being profitable, has now been included in the manufacturing sector and is no longer on its watch list.

Cedar Paint is in the process of closing its Bloemfontein branch, as well as downsizing its Klerksdorp branch. “We have also consolidated the control of the Durban operation into the Pretoria factory which has had the effect of reducing the administrative costs along with improving the financial control and customer service levels,” Argent said.

The steel trading operations continued to trade positively while emphasis has been on the reduction of stock holding. To this end, Phoenix Steel Gauteng has managed to reduce its year-end stock by R16-million.

“In addition, we are in the process of reducing our steel exposure in Cape Town, which will provide a further R15-million in stock relief,” it said.

Argent highlighted that the current steel trading environment was “very difficult” with government “hell bent” on creating an inefficient singular carbon steel supply monopoly, while nullifying the local manufacturer through higher input costs.

“We will continue downsizing our carbon steel merchants until we have correctly matched our operational returns,” it noted.

Meanwhile, the company said that while recent price increases in the automotive sector managed to turn it around, the sudden announcement from General Motors in May that it would disinvest from South Africa would result in Argent’s automotive plant being closed in September.

The group has provided an additional R2-million in the form of stock provisions but has not provided for the cost of retrenchments and the capital losses on the equipment, which will be market dependent.

“Our outlook remains positive as the group is well positioned to take advantage of any upswing in the South African economy as well as being in a position where it can rely on its overseas operations for positive growth and as a hedge against the rand,” it stated.

However, Argent warned that companies needed to take heed of South Africa’s current macroeconomics and the unpredictability of the local political environment and the consequent economic implications.