Argent hit by fresh strike action, remnants of 2013 strikes weigh on FY

1st July 2014

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

  

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Strikes have emerged as a major concern for JSE-listed Argent Industrial as continuing labour disputes weigh on its profitability.

After having emerged from a year of industry- and countrywide labour disputes in 2013, Argent entered the new financial year under the burden of the five-month-long platinum sector strike and is now preparing to weather the latest industrial action in the metals and engineering sector strike, which started on Tuesday.

Over 220 000 National Union of Metalworkers of South Africa (Numsa) members in the metals and engineering sector downed tools in indefinite industrial action as wage talks, in which the union demanded a one-year bargaining agreement with a wage increase of 12%, deadlocked last week.

Argent executive director Fred Litschka said the demands of the unions were on par with the demands made in the platinum sector wage dispute.

While the basic wage demands and offers were misaligned by a few hundred rand, the workers were now demanding housing allowances in excess of R1 000 and the elimination of labour brokers, besides other conditions.

The employers’ latest three-year wage settlement offer comprised a 7% all-inclusive, cost-of-employment increase in 2014 and a consumer price index- (CPI-) aligned increase in 2015 and 2016 for Rate A employees and an 8% all-inclusive, cost-of-employment increase in 2014 and a CPI + 1% increase in 2015 and 2016 for Rate H employees.

Argent planned to retrench nearly 400 employees as it embarked on an automation programme as the continuous strike action cost the company 29 500 lost man-days and R15.9-million during the financial year to March 31.

The group, which would now reduce its staff from 2 774 to 2 400 employees by the end of 2015, would absorb the cost of the retrenchments in the 2015 financial year, with the benefits emerging from the 2016 financial year onwards.

“The effects of the continuous countrywide strike [will] somewhat [be] addressed by automation,” said Litschka, adding that the “automation button” needed to be pushed now.

The platinum strike, which saw about 70 000 workers down tools in January, had severely impacted on Argent subsidiaries Toolroom Services, Hendor Mining – one of the largest contributors to group profit – and Cedar Paints, which supplied nearly 85% of underground mine-mark spray to the mines in South Africa.

Cedar had lost R6.8-million in revenue and R1.5-million in bottom line earnings. However, a new distribution contract for Rust-Oleum was expected to add R4-million to the bottom line, which would bring the company back into profitability and off of Argent's 'watch list'.

An automotive strike during August and September last year weighed on Argent subsidiaries Sentech and Excalibur, when over 30 000 workers at Nissan, BMW, Ford, Toyota, Volkswagen, General Motors and Mercedes-Benz, which all manufacture vehicles in South Africa for the local and export markets, downed tools for three weeks as wage negotiations reached an impasse.

A new three-year wage agreement secured workers a 10% across-the-board increase in the first year, as well as an extra sum of money, which would vary according to pay scale. The second and third year would see an 8.5% across-the-board increase, with additional money again added according to pay scale.

Further, an unprotected strike in August and September last year at the group’s Tricks subsidiary had impacted output and led to the dismissal of 200 employees.

The strikes and the effect on the economy had cut Argent’s profit before interest and tax by 37.2% to R79.3-million during the year ended March 31.

Argent stressed that a focus on production automation, improving internal efficiencies and growing the market share of its respective brands would be critical to "outperforming within a constricted economy" and mitigating protracted strikes.

The Numsa strike, which would impact three-quarters of the group’s operations, would, for the next three weeks, be mitigated by R8-million to R9-million in stockpiles set to last about three weeks, which is how long Argent expected the strike to last.

“The Numsa strike [in addition to the final stretch of the platinum strike] was undoubtedly going to affect our [financial] figures [during the first quarter of the year],” said Litschka.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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