BSI Steel reports lower earnings as it plans to delist


BSI Steel reports lower earnings as it plans to delist

Published Date: 2017-12-15 | Source: Stephen Gunnion | Author: Stephen Gunnion

BSI Steel reports lower earnings as it plans to delist

The company is on a cost-cutting drive, including the expense of a JSE listing

BSI Steel is pulling out all the stops in order to survive under difficult market conditions. Measures include a delisting of the company, which it proposed to shareholders last month. It says the size of the business and absence of liquidity in its shares doesn't warrant the costs of remaining listed. It says it doesn't expect to raise equity capital in the near future so doesn't need the listing to support its growth aspirations.

BSI says weakness in the local economy is putting pressure on its margins, exacerbated by the low margin business at associate Isilo Steel. It sold a majority stake in Isilo to black investors in June but the business is still consolidated in its accounts in line with IFRS due to the significant sureties its put forward to support credit lines to the buyers. It also sold Qinisa Steel Solutions during the year but still managed to grow revenue by 15% to R1.43 billion in the six months to end September. Profit from continuing operations fell 70% to R11 million and headline earnings per share declined by 62% to 1.6c. It reported a R1.1 billion loss from discontinued operations, including its Ghanaian operation and the sale of its business in the Democratic Republic of Congo this year. It hasn't declared an interim dividend.

The company says it has continued with a cost reduction programme and may close its Pietermaritzburg distribution facility to reduce its cost base. With steel consumption largely driven by manufacturing, construction and mining, it says any meaningful uptick in the industry can only be driven by improved business confidence and investment in these sectors.

If the scheme of arrangement for its proposed delisting is implemented, BSI will re-acquire some of its ordinary shares at 50c per share and will then apply to the JSE to terminate its listing on the AltX market.

Its shares closed unchanged at 42c.

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