Company Announcement -Insimbi, a supplier of high grade specialised raw materials to the steel, stainless steel, cement, paper, refractory, castings and other industries, announces its unaudited consolidated condensed financial results for the six months ended 31 August 2015 and declares its interim dividend.

According to CEO of Insimbi, Pieter Schutte: “In challenging global markets, Insimbi has been pragmatic in positioning itself, notably in the foundry and refractory segments, to achieve increasing profit and return for shareholders, seen in our increase in revenue of 7.5% for the period. Our reliance on the beleaguered steel sector has reduced considerably and we have effectively reached a level of sustainability."

When compared to the 6 months ended 31 August 2014:

• Revenue increased by 7.5% to R493 million.
• Gross profit increased by 20.1% to R59.8 million
• Finance costs decreased by 26.2% to R3.5 million
• Earnings per share (“EPS”) is up by 73.7% to 5.94 cents per share
• Headline Earnings per share (“HEPS”) is up by 73.3% to 5.91 cents per share
• Cash generated by operations improved by R35.9 million from R10.6 million utilised to R25.3 million generated
• Net asset value (“NAV”) and tangible NAV increased by 20.5% and 20.1% to 59.3 cents per share (“cps”) and 55.2 cps respectively
• Insimbi acquired a 75% shareholding in Polydrum (Pty) Ltd
• Insimbi acquired the property 360 Crocker Road, Wadeville
• The group has declared a gross interim dividend of 2.00 cents per share for the period ending 31 August 2015

Mr Schutte added: "We have continued to optimise efficiency in all of our divisions, especially at our secondary aluminium smelters as we seek to define new markets for our aluminium products. Before year end, we will have commissioned an upgraded smelting facility at our Johannesburg operation. “The company also looks to expand on not only our core segments but also in our Nano Milling paint based products, with the appointment of an experienced quality technician, as well as the plastics segment with the acquisition of Polydrum (Pty) Ltd which has provided additional cash flow to our increasing revenues."

The company's Foundry segment has performed well generally and despite continued competition both locally and from abroad, it achieved revenue of R366.8 million, a 4.5% or R15.7 million increase on the previous period under review. This segment is traditionally a “barometer” of how well the economy is doing and it appears to have reached a comfortable level of sustainability. A change in product mix coupled with a weaker currency, has helped lift margins. The two secondary aluminium smelters which forms part of this segment have been operating much more efficiently although they have been faced with a lower order book as a result of the challenges facing the steel industry.

Insimbi is in the process of commissioning a more modern and efficient smelting facility at its Johannesburg operation and is confident this will improve operational efficiencies. The upgraded facility should be operational by no later than the end of November 2015. The Steel segment continues to be faced with many challenges including cheap imports and erratic power supply.

In September, ITAC announced a 10% import duty on certain grades of locally produced steel and Insimbi is confident that this will assist the ailing steel industry to recover in time. There has been application for this duty to extend to a broader range of locally produced steel products and the company waits in anticipation for further relief to be legislated. Revenues in this segment continued to decline in the period under review and it achieved sales of only R58.9 million compared to R66.3 million in the previous comparable period, a reduction of 11.1% or R7.4 million. Insimbi’s reliance on the steel sector has reduced significantly over the years and while this is strategically prudent, it looks forward to the resurgence of this sector in the hopefully, not too distant future.

The refractory segment has seen significant growth in the current financial interim period and achieved revenues of R64.6 million compared to R41.5 million in the previous year, an increase of 55.7% or R23.1 million. This has always been an extremely cyclical business sector and history has taught us that it generally is opposite to that of the steel sector and this helps to “flatten the curve”.

Insimbi Nano Milling paint based products continue to be expanded but it has been a challenge to produce a consistent quality product. To remedy this, the company has appointed an experienced laboratory and quality technician. There are significant growth opportunities for Insimbi in this field and it hopes to capitalise on its technology and investment in this operation. Insimbi's entry into the plastics segment with the acquisition of Polydrum (Pty) Ltd effective 1 August 2015 is an exciting opportunity for the group and while there are no comparatives at this early stage, it is very promising to note revenues of R2.9 million and gross profit of R1.1 million in the first month of ownership.

“As our focus moving forward remains on the businesses fundamental resilience by reducing working capital and operational costs as well as strengthening our relationship with current suppliers, management will also be looking at ways to expand on current incremental profit and I look forward to updating the market on further opportunities in the future,” Mr Schutte concluded.