Western Cape Business News

Send  Share  RSS  Twitter  26 Aug 2012

CONSTRUCTION: Is Megamix Up For Sale?


Recent Western Cape Business News

A THROWAWAY line in the annual report of industrial products specialist Argent Industrial suggests two of its main Cape-based operations could be soon sold.

And this might transpire despite a better outlook for the respective businesses.

In his annual review Argent CEO Treve Hendry noted Megamix and Argent Industrial Engineering were seeing improved volumes in the Western Cape.

He said there was an increase in work originating from the low-cost housing market in particular. But Hendry noted the market was still very competitive and margins remained under pressure.

Then came the bombshell: “There has been a consolidation in the suppliers of ready-mix and stone in the market in general, and this has resulted in a number of suitors for this business that Argent is currently investigating.”

It does not take much reading between the lines to presume that Megamix and Villiersdorp Quarries are up for sale. While the two construction aligned companies did look a little out of place amidst Argent’s mainly steel-based engineering operations, observers felt the company might have held onto Megamix and Villiersdorp until conditions in the building sector showed a material improvement.

Both businesses have a considerable foothold in their respective niches. Villiersdorp Quarry’s supplies the building and civil industries with materials used in the building of roads and dams as well as for the production of concrete (site batching and ready mix).

Villiersdorp comprises a Quartzitic Sandstone Quarry on a portion of the Farm Eseljagt No.120, which is situated on the R43 between Villiersdorp and the N2 highway.

Two crushing plants are capable of processing 1 500 tons of rock per day.

Megamix is a well known supplier of readymix concrete and mortars as well as crushed stone products.

Talk around the Cape construction sector suggests either Afrimat or Lafarge could be the likely purchaser of both Megamix and Villersdorp Quarries.

The price offered by a buyer will be interesting to gauge at this early stage of the recovery in the building supplies sector.

The businesses have never really been a drag on Argent and always appeared to wash their own faces – even in tough trading conditions.

In the year to end March Argent’s ‘construction’ segment generated R97 million in revenue and eked out R2.5 million in profits. In the pervious financial year turnover was around R77 million with profits coming in at R1 million. With these numbers in mind suggestions that Megamix and Villersdorp Quarries would fetch roughly a R30 million price tag would probably be reasonable.

Although Argent must be kicking themselves they never sold these assets off in the boom years between 2006 and 2007 when a sum of three times that price might easily have been paid by any number of acquisitive suitors.

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