Penrice confident returns will improve
Penrice Soda remains convinced it made the right decision in closing its soda ash plant and is confident it can achieve better returns, chairman David Trebeck told the company’s AGM in Adelaide yesterday.
The Osborne-based company has implemented extensive changes to its business in the past year, closing its loss-making soda ash plant and entering into a natural soda ash import joint venture with Pro Asia Pacific.
“After the initial absorption of upfront costs, the joint venture is trading profitably,” Trebeck said.
“Most, but not all, customers have transferred to the JV. However, aggregate soda ash demand remains soft for many of the reasons that caused Penrice’s manufacturing operation to become unprofitable.
“Our decision to close the plant has unquestionably been the correct one.”
After reporting negative cashflow for the first quarter of the 2014 financial year, due largely to the restructuring costs, Trebeck said early figures showed October had been a break-even month.
The forecast for the rest of the financial year was for a “modest, but gradually improving, monthly level of positive net free cashflow”.
“We have stated that FY14 will be a year of transition, with the full benefits of the restructure becoming apparent in FY15. That is still our view.”
Penrice previously reported an underlying net loss after tax for the year ended June 30, 2013, of $21.4 million, well up on last year’s $6.7 million. Statutory net loss after tax was $50.1 million, down on last year’s $63.6 million, and included impairment and restructuring charges of $30.0 million.
Stay informed, daily
Trebeck told the AGM that the development of Penrice’s lime business had been a positive aspect of the soda ash restructure.
Earnings from sodium bicarbonate manufacture remained as expected, while the quarry business reduced significantly.
“Reflecting the continuing weakness of the South Australian housing and construction sector, quarry product demand remains well below historic levels. We can say at least demand does not appear to be deteriorating further and there are tentative signs of a recovery emerging. The business is well placed to benefit from a recovery in demand.”
Trebeck said the company’s long-term viability depended on three things: achieving or exceeding company forecasts, developing the quicklime market and securing viable contracts that cover production, and negotiating a successful debt restructure and recapitalisation of the business.
Shares closed at 5.3 cents.
