Insimbi takes a pounding, pays dividend

Marc Hasenfuss | Fri, 09 Oct 2009 10:30
[miningmx.com] -- METALS trader Insimbi Holdings took a grinding during the six months to end August 2009, but opted to pay out a 2c/share interim dividend.

While Insimbi’s profits crumbled to R7m from R39m in the corresponding interim period last year, CEO Pieter Schutte stressed the AltX-listed company remained cash generative thanks mainly to a product offering and attention to working capital.

Major falls in revenue were seen in Insimbi’s foundry business (down from R147m to R60m), the non-ferrous division (R84m to R37m) and Steel (R201m to 59m).

Schutte said the steel, foundry and non-ferrous divisions experienced a slow down due to their customer base operating on a three or four working day week for much of the period under review.

The newly formed Cape Town trading division chipped in R17m of revenue. Insimbi’s best performer – in terms of revenue and profit – was its Rotary Kiln, which managed to push profits up R9.3m (R7.7m) from reduced turnover of R48m (R54m).

Insimbi’s cash flow statement showed operational cash flow of R18m – down by nearly two thirds on the previous year’s R52m.

Net operational cash flow, though, was negative to the tune of R8m after R23m flowed out in the form of tax, interest paid and dividends paid.

Insimbi’s cash-on-hand halved from R34m to R17m. The interim dividend will account for another R5,2m.

While some may question the wisdom in Insimbi paying out the bulk of its interim earnings in dividends, especially at such a delicate time in the commodity cycle, Schutte maintained Insimbi remained focused on costs and working capital management as well as holding a comfortable level of debt.

He said tough trading conditions would persist into the second half of the financial year with demand and prices remaining subdued - but believed there were "definite" signs of a sustainable and gradual recovery in the company’s markets.

Looking further ahead, Schutte said the government infrastructure programme was expected to last well beyond 2010, which – coupled with the company’s expanding export potential, ongoing organic growth and new product development – meant Insimbi was well positioned to benefit from an eventual upswing.