AltX-listed flooring and chemical group Accentuate has found the technical solution for moving its Floorworx manufacturing plant in East London off the grid and is currently crunching the numbers to ensure financial viability.
This follows after the plant, that employs about 160 people over two shifts, was materially impacted by load shedding in the year ended June 30. Floorworx contributes almost 80% to group turnover.
The Floorworx plant produces vinyl floor tiles in a continuous heat driven process and two hours of load shedding has an impact of seven hours stoppage with some of the material that has to be scraped off the equipment and discarded, Accentuate CEO Fred Platt said.
He explained that management was sometimes notified of load shedding earlier on the same day and in other cases not at all. The company at times during the reporting period suffered load shedding three to four times per week. It tried to liase with Eskom and the local distributor, the Buffalo City metro. The metro tried to assist by scheduling the load shedding at night, but that in fact exasperated the problem, since staff had to be evacuated in the dark, which only increased the risk.
He said sometimes the plant had staff on site, but no electricity and at other times when load shedding was anticipated, a decision was taken to have them work short hours, only to find the load shedding didn’t materialise and they ended up having electricity and no staff.
Donald Platt, CEO of Floorworx, said the industry will be much better placed to mitigate the effect of load shedding if it were predictable. Fred Platt agreed, saying even if load shedding was implemented on a sustained, but predictable, basis the impact would be smaller.
Asked about the Mercedes Benz plant, also supplied by Buffalo City, but was spared load shedding, Platt said load shedding was a problem facing the whole economy and asked why one sector was seemingly considered more important than another.
He said the group will most probably use a basket of technologies to move off the grid, including solar PV, solar thermal, wind and biomass. Using a generator during load shedding is just too costly, taking into account the energy intensive manufacturing process, he said.
Despite the impact of load shedding and strike action that paralysed the Floorworx and Safic factories in July, the group reported a 3.4% increase in turnover to R318.6 million and a 2.3% increase in gross profit to R164.5 million.
Platt said the results were achieved in very difficult trading conditions and testified to a continued focus on cost containment that limited the increase in operating expenses to 2.4%. This includes R1.8 million in directors’ fees for the years 2012, 2013 and 2014 that were paid in the reporting period.
The headline earnings per share of 3.97c was 11% lower than in the previous financial year. Normalised headline earnings, which reflects the directors’ fees as if they had been expensed in the years they relate to, show an increase of 27% over the previous corresponding period.
The late payment of of the directors’ fees followed a court ruling in favour of the company and against minority shareholders that have since sold their stakes in the company. This ended an extended period of disharmony among shareholders.
Fred Platt said for the first time in five years Accentuate’s shareholders are now aligned and management can focus all their attention on growing the company.
The group is especially optimistic about its joint venture (JV) with the Indian Ion Exchange, named Ion Exchange Safic. The JV supplies water treatment solutions and was started from scratch a few years ago.
Platt said the JV is already at break even and is starting to gain traction. He said some trials were successfully completed with mines and the JV is now registered and qualified to supply into those networks.
Ion Exchange has supplied water treatment technology for nuclear power stations in India and is well positioned to do the same for South Africa’s proposed nuclear build programme, he said.
Accentuate is in an “aggressive growth phase”, eyeing R1 billion turnover, Fred Platt said. The cost of trading as a listed company is too high for the current turnover. The group has however “paid its school fees”, has management experience and a very capable board that positions it well for growth, he said.
The group will look at acquisitions in markets and products it already operates in, as well as closely related industries. It has no long-term gearing and is prepared to fund growth from debt or equity, whichever is appropriate, he said.
The share price remained unchanged at 60c on Monday. It increased by 53.58% over the past 30 days and 15.38% in the year to date.
No dividend was declared.