Metal products maker Argent Industrial has criticised the government for granting ArcelorMittal SA import tariff protection, saying SA’s largest steel producer is "hell-bent" on creating an inefficient primary steel supply monopoly, while killing off downstream steel processing through higher input costs.
It said in its results statement for the year to March released on Thursday that General Motors’ departure from SA meant that Argent would close its automotive plant before the end of September.
"The current steel-trading environment is very difficult, with the government hell-bent on creating an inefficient singular carbon steel supply monopoly," CEO Treve Hendry said in the results statement. "The recent price increases did manage to turn this sector around. However, the sudden announcement from General Motors that they are disinvesting from SA will result in our automotive plant being closed."
In this regard, the group had provided an additional R2m in the form of stock provisions but had not provided for the cost of retrenchments and the capital losses on equipment, which would be market dependent.
That said, the company’s revenue for the year grew 8% to R1.8bn and taxed profit grew 14% to R63m. Argent declared a final dividend of 11c, taking its total for the year to 19c — 1c higher than the previous year’s.
The group also said its core manufacturing division was hit by the downturn in the economy and rand strength in the period. However, its main brands performed to expectations, although steel furniture and the Jetmaster fire division showed negative returns. Cedar Paint, though, was profitable and was no longer on the "watch list". However, it was closing its branch in Bloemfontein and downsizing in Klerksdorp.
"We have also consolidated the control of the Durban operation into the Pretoria factory, which has had the effect of reducing the administrative costs along with improving the financial control and customer service levels," Hendry said.
Argent also said its Hendor Mining business was handed an "unexpected court ruling" by the Constitutional Court relating to an unfair dismissal case from 2007 for which it had provided R4.5m in the current financial year. Hendor makes scrapers for heavy-earthmoving machinery, supplying all major mining groups, and also exports products. The ruling came as the new Mining Charter had further placed jobs in jeopardy amid low commodities prices.
Argent said its steel trading operations continued to trade positively, with an emphasis on reducing stock. The group said the outlook remained positive and it was well positioned to take advantage of any upswing in the South African economy as well as being in a position where it could rely on its overseas operations for positive growth and as a hedge against the rand.
But it said that SA’s current macroeconomic situation and the unpredictability of the domestic political environment had uncertain implications.
With Robert Laing