Western Cape Business News

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BUILDING: Argent Now Not Ready To Sell?


Recent Western Cape Business News

IT SEEMS the sale by Argent Industrial of its Western Cape based building supplies operations is no longer imminent.

In August last year CBN reported that comments in Argent’s annual report suggested strongly that two of its main Cape-based operations – Megamix and Villiersdorp Quarries - could be soon sold.

At that time Argent CEO Treve Hendry noted a consolidation in the suppliers of ready-mix and stone, adding that this had “resulted in a number of suitors for this business that Argent is currently investigating.”

Market talk then centred around either Afrimat or Lafarge being the likely purchaser of both Megamix and Villiersdorp Quarries.

But recently released interim results from Argent contain no further hints that either operation is up for sale.

In fact, Hendry’s interim comments on the operations were scant with Megamix barely breaking even for the reporting period with profits of only R68 000.

He indicated that although order levels are higher for the second half of the financial year, the outlook for the construction industry in the Western Cape remains conservative. Whether Argent – which had R400 000 in profits at the half-way stage last year - can match the previous year’s full year profit of R2.5m from building supplies looks a tough task.

Perhaps what is most worrying about the performance of Megamix was the fact that turnover slipped from R49m in the corresponding six months in 2011 to just R41.5m.

By contrast Afrimat, another Cape-based building supplies conglomerate reported profits more than doubled to R3.9m from turnover of R97.4m from its ready mix operations.

Perhaps Afrimat’s improved showing is informing Argent’s decision around what to do with the building supplies operations. Perhaps Argent will look to returning the businesses to higher levels of profitability before dangling out the ‘For Sale’ sign again?

CBN reckons Argent would probably hope to fetch at least R30m for Readymix and Villiersdorp Quarries, which won’t be easy if the business is merely breaking-even.

But activity at Argent’s competitors does raise some hope that trading can improve in the medium-term.

Although Afrimat’s geographic spread is much broader than Argent’s readymix operation, it is worth noting comments that the readymix business was returning to previous levels. Afrimat also reported improving trading conditions in the Western Cape.

One also has to consider the willingness of PPC – who have also noted that demand in the Western Cape is starting to show improvement – to invest in the modernisation of its local cement facilities (see CBN November edition for detail).

CBN reckons the sale of the building supplies segment is a case of ‘when’ rather than ‘if’, remembering that for the most part Argent is welded to steel-based products and services.

Argent has also shown a willingness of late to refocus on its most profitable operations, and recently closed its branch in Port Elizabeth.

Interestingly, Argent’s steel trading and retail operations are mostly profitable with the exception of Gammid Cape. This division has now been restructured to focus more on the steel, stainless steel and aluminium markets in the Western Cape.

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