Insimbi achieves higher revenue, gross profit in FY18

29th May 2018 By: Simone Liedtke - Writer

JSE-listed Insimbi Refractory and Alloys Supplies will be adding a significant value uplift to its chrome and aluminium businesses when it starts supplying powder-makers with a lower-grade aluminium content powder.

It will start taking orders for this product in July, Insimbi CEO Fred Botha told Engineering News Online on Tuesday.

Reporting on the company’s results for the financial year ended February 28, he highlighted that revenue increased by 160% year-on-year to R3.5-billion, while gross profit, despite lower margins from the recycling business, increased from R185.8-million in the prior financial year to R345.4-million in the year under review.

Margins were, however, depressed in the fourth quarter as a result of a sharp decrease in the prices of affected commodities, and a sudden and dramatic strengthening of the South African rand against other major currencies.

The foundation business of Insimbi, however, experienced a challenging year in the steel industry with local raw material supply having to be replaced by imports in a weak rand:dollar exchange rate environment and requiring settlement in advance or on delivery, the company noted.

The local steel industry was also under pressure from cheaper imports of finished product from the East and subdued spend on infrastructure and a sluggish economy.

The US/China trade spat, Botha added, also affected Insimbi’s operations, but has opened up several possible opportunities for the group.

The aluminium smelter business, meanwhile, experienced a healthy 20.6% growth in turnover, while the company’s plastics business turnover grew by 29.6%

Growth in plastics will remain a key priority moving forward, Botha said.

Despite a comparable trading period in the second half of the year, lower margins impacted on the second half of the year’s profitability.

Operating profit rose by 135% from R54.4-million to R127.8-million, which Botha says reflects the impact of lower margins in the metals recycling business relative to revenue growth.

The year under review saw Insimbi’s operating expenses increase by 63.5% to R216.8-million, while the cash flow generated from operations of R166.4-million allowed for the repayment of financial liabilities of R69.8-million.

Total cash generated at the end of the year was R24.5-million, compared with the R8.7-million used in the prior year.

The most significant change, Botha enthused, was the company’s improved debt to equity ratio, which improved to 55% from 91% in the prior year. This equates to R78-million of debt settled in the period.

Owing to these positive results, Insimbi has declared a final dividend of 3c a share.

This, Botha said at the results presentation in Sandton, is an “exceptional achievement in the current economic climate and allows Insimbi the flexibility and ability to source, review and execute on opportunities".

Opportunities, he continued, are being presented to Insimbi rather than the company having to source those opportunities itself.

The purchase of Amalgamated Metals Recycling (AMR), which bolstered the group’s 2017 financial performance, was a “transformative transaction for Insimbi”, Botha noted, adding that AMR increased revenue and profits by R2.57-billion and R80-million, respectively.

The integration of AMR into the wider Insimbi group has been seamless, he said, adding that AMR has further diversified the group’s geographic reach, customer base and solutions to customers.

Meanwhile, about R18-million of value has been created in the group’s two employee share option schemes, which were established in 2016.

Despite a flat start to the new financial year, combined with the public holidays in March and April and industrial unrest, an optimistic Botha commented that the company’s financial results reflect the integration of AMR into the Insimbi business, but also that the core business is, and will continue to be, integral to the success of Insimbi.

Insimbi on Tuesday also celebrated its ten-year anniversary since listing on the JSE.