MANUFACTURING: Closure of SANS Fibres, Bellville
Recent Western Cape Business News
AECI has announced that it is contemplating the closure of operations at SANS Fibres Bellville. SANS has been under threat for some time and exhaustive and protracted attempts to find sustainable solutions for its long-term future have been unsuccessful. With great regret, therefore, AECI contemplates closing the industrial fibres and polyethylene terephthalate polymer (PET) businesses. It is currently foreseen that production will cease by the end of March 2009, and asset recovery and site clearance are expected to be completed by the end of the year. Land realisation will also commence by end-2009.
SANS was established in the 1960s to provide nylon and polyester fibres to the South African textile industry. In the 1990s it refocused its operations to provide industrial fibres, primarily into the export market. It became a major global supplier of these fibres for end uses such as parachutes, seat belts and athletic shoes.
In recent years, SANS’s nylon and polyester businesses have come under increasing pressure for several reasons. These include technology improvements of new plants in the Far East, which are closer to main markets; cost increases in raw materials and utilities in South Africa; and the lack of a reliable electricity supply.
SANS’s management and AECI attempted to address these challenges by rationalising the business and seeking a trade purchaser who could add value by addressing some of the strategic issues. The intended sale of the nylon business was not concluded and the rationalisation programme, though sustained and pursued with great diligence and dedication by all of SANS’s people, has not placed the company in a position to achieve adequate returns. Unfortunately, this situation is expected to worsen in the coming years.
The polyethylene terephthalate (PET) polymer business was one of the first of its kind in the world and is the major supplier to the South African market. PET is used primarily in packaging of soft drinks and bottled water. The long-term sustainability of this business is questionable in terms of its ability to reward the capital invested in its assets. Furthermore, it is expected that the business will continue to be adversely affected by local and international oversupply, particularly as a result of new South African capacity, and the global economic crisis. The PET business has, in addition, been impacted by cost increases in raw materials and utilities and the lack of a reliable electricity supply. Sadly, and after completing an extensive due diligence process, a successful agreement for the sale of the PET business could not be reached with prospective purchasers.
Against this background, and after prolonged and thorough investigation of all alternatives, AECI was left with no option but to contemplate closure of SANS’s Bellville operations. It is highly regrettable that these contemplated closures are expected to result in job losses for approximately 640 employees – many of whom are long-serving and all of whom have shown great commitment and resilience in a difficult period of uncertainty.
Consultations with representative unions and other employees have commenced and SANS remains committed to assisting its people with finding alternative employment.
Consultations with SANS’s customers and suppliers are being initiated to ensure, wherever possible, minimal disruption to their operations. Should operations cease at end-March 2009, working capital recovery would commence and the site cleared of production assets.
The Bellville site is large, well-situated and marketable and contains buildings suited for general industrial activity and warehousing. AECI will seek to realise value from this by leasing the buildings or via the sale of the site.
Bellville’s sister fibres operation at Stoneville, North Carolina, USA, is not affected by the contemplated closure of Bellville. It is, and is expected to remain, profitable. It remains AECI’s intention to exit this business.
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