Sentula tightens belt in contracting business

[] – THE difficulties in South Africa’s mining industry were reflected in the interim performance of Sentula Mining.
The company said it was preparing for margin compression in its mining services unit, and that it had trimmed its exploration business, Geosearch.

Sentula Mining, which houses brands in the coal and platinum contracting sector, as well as drilling firms, a coal mine, and near-term coal developments, nonetheless pulled off a decent interim performance.

Adjusted headline share earnings increased 7% for the six months ended September to 11.8 cents compared to 10.6 cents in the interim period of the previous year. This was despite lower revenue, partly a function of having closed its unprofitable Megacube mining services company. Shares in Sentula were unchanged at R1.78/share on the JSE.

Robin Berry, CEO of Sentula, acknowledged the company was budgeting for tighter margins in the contracting business, an industry which has come under fire lately in the aftermath of the now infamous Marikana tragedy in August when striking Lonmin workers were shot by police.

The mismatch between full-time employee and contractor salaries is thought to be one of a host of grievances held by protesting workers.
“Improving employment conditions have been underway in the contracting business for some time,” said Berry. “Historically we have been playing catch-up,” he said, adding that the company had been improving social benefits and other allowances for a number of years.

He added, however, that as margins fell for mining companies, under pressure from high labour and electricity costs, it might provide some opportunities for contractors.
One of Sentula’s businesses, Benicon, provides mining services to South Africa’s coal industry including Anglo Thermal Coal and Xstrata’s operations.

However, contraction in the platinum sector in particular had led to a R3.6m downsizing of Geosearch’s South African business. A further R9.5m had been set aside for “inventory obsolescence”, Sentula said in a statement to the JSE.

Sentula also confirmed it was in a R47m dispute with Keaton Energy which terminated Sentula’s services at the Vanggatfontein colliery in Mpumalanga province in May, but failed to fully pay out the remainder of its three-month notice, Berry said.

Sentula has recently emerged from litigation related to fraud perpetrated by former directors, Jason Holland and Cas Scharrighausen which had been calculated to total R383m.