VENTURES: This Castle Is For The Taking
Recent Western Cape Business News
LISTED timber specialist Kay-Dav endured a few weeks of ‘deal or no-deal’ activity before managing to sell off loss-making Castle Timbers, its Bellville-based timber manufacturing plant.
CBN first noticed a proposed cash sale of Castle Timbers to Moorreesburg-based Swartland Boudienste in mid-November 2010.
At that time a proposal was on the table for Castle Timbers to sell ‘certain assets’ - including machinery, goodwill and stock - to Swartland Boudienste for R6 million plus the net asset value of the machinery (around R1.8 million) and the total cost of the stock.
Roughly a month later Kay-Dav announced that the proposed sale of Castle Timbers to Swartland Boudienste had been terminated and replaced by another transaction.
Exactly why the Swartland Boudienste transaction was called off was not made clear in an announcement to Kay-Dav shareholders.
All the announcement disclosed was that the deal hinged on “certain suspensive conditions” being met before 3 December 2010. The date was extended by a week, but conditions – which included a due diligence by Swartland Boudienste - were obviously not fulfilled.
The ‘replacement’ transaction involved Kay-Dav selling Castle Timbers to another Cape company, Stellenbosch-based pine specialists Cape Sawmills.
The Cape Sawmills deal looked slightly different to one struck with Swartland Boudienste because it involved the sale of the Castle Timbers business “comprising all of the assets and liabilities as a going concern…” The price tag was set at R11 million – which may or may not have been equivalent to Swartland Boudienste’s price including the value of the machinery and stock.
Whether Swartland Boudienste was relieved or disappointed to lose out on Castle Timbers we’ll never know.
But it’s clear from statements from Kay-Dav that Castle Timbers - which produces anything from fences to gates and dog kennels to workbenches - was notching up some hefty losses.
Outlining the rationale for selling Castle Timbers Kay-Dav pointed out that the company had incurred ‘significant losses’ and that further investment to ensure an acceptable level of profitability was ‘undesirable’.
It’s clear that Castle Timbers has some potential, but perhaps needs some patient tweaking to repair bottom line.
In the year to end June 2010, Kay-Dav reported that sales in the wood manufacturing segment increased by a whopping 48% - “mainly via the Castle Timbers manufacturing business”.
But the top line gains sadly did not translate into bottom line growth. Kay-Dav disclosed that the manufacturing segment posted an operating loss of R3.2 million.
At that stage CEO Gary Davidson said the manufacturing segment’s performance was “naturally of great concern and management is making every effort to ensure this segment develops to an acceptable level of profitability”.
Clearly, in the longer run, Castle Timbers was not worth the effort. It will be interesting to see what Cape Sawmills can muster…
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