Dawn sells stake in Watertech

• Maker of in­dus­trial, san­i­tary­ware and kitchen prod­ucts off­loads 49% in­ter­est in Grohe Dawn Watertech to Ja­pan’s Lixil Cor­po­ra­tion

Business Day - - FRONT PAGE - Mark Al­lix In­dus­trial Writer al­lixm@bdfm.co.za

Dis­tri­bu­tion and Ware­hous­ing Net­work has sold its 49% non­con­trol­ling in­ter­est in Grohe Dawn Watertech to Ja­pan’s Lixil Cor­po­ra­tion for R324.5m.

Dis­tri­bu­tion and Ware­hous­ing Net­work (Dawn) has sold its 49% non­con­trol­ling in­ter­est in Grohe Dawn Watertech (GDW) to the Lixil Cor­po­ra­tion of Ja­pan for R324.5m.

Dawn’s share price shot up 20% af­ter the an­nounce­ment. But closed 11% firmer at R1.06.

The maker of a broad range of in­dus­trial, san­i­tary­ware and kitchen prod­ucts has strug­gled amid the crises in SA’s min­ing, con­struc­tion and build­ing in­dus­tries and, more re­cently, agri­cul­ture. It will use the pro­ceeds to pay down group debt of R200m and set­tle cap­i­tal gains tax aris­ing from the sale.

GDW com­prised about 10% of Dawn’s to­tal rev­enues.

Dawn will now be­come master dis­trib­u­tor in subSa­ha­ran Africa for Lixil, one of the world’s big­gest sup­pli­ers of wa­ter, hous­ing, build­ing and kitchen tech­nolo­gies. Lixil al­ready owned the con­trol­ling 51% of GDW shares through Grohe, a san­i­tary­ware maker based in Ger­many that is a wholly owned Lixil sub­sidiary.

“We got top price and are go­ing to pay off our debt and stay in a part­ner­ship [with Lixil] as master dis­trib­u­tor,” Dawn CEO Edwin He­witt said on Thurs­day.

In late 2014, Dawn, known as the maker of Co­bra taps and Vaal san­i­tary­ware brands, sold 51% of GDW to Ger­many’s Grohe. This hap­pened just as Europe’s big­gest san­i­tary­ware maker was be­ing sold to the Lixil build­ing ma­te­ri­als com­pany. At the time Dawn had aimed to glob­alise its man­u­fac­tur­ing op­er­a­tions.

Lixil pres­i­dent Kinya Seto said on Thurs­day that subSa­ha­ran-Africa mar­kets had great growth po­ten­tial, but af­ter the ini­tial in­vest­ment Lixil made in 2014, “the gen­eral eco­nomic sit­u­a­tion in SA be­came more chal­leng­ing. With­out mak­ing these changes … our abil­ity to turn around and grow the busi­ness was lim­ited,” he said.

Dawn said the lat­est trans­ac­tion did not com­pro­mise the in­tent of the orig­i­nal GDW deal, as Dawn re­mained a long-term master dis­trib­u­tor for the GDW prod­uct range in SA, Botswana, Swazi­land, Namibia, Le­sotho, Zam­bia, Zim­babwe, Malawi, Mozam­bique, Sey­chelles, Ghana, Rwanda, Tan­za­nia and the Demo­cratic Repub­lic of the Congo.

He­witt said GWD prod­ucts would now be com­ple­mented by Grohe and Lixil prod­ucts.

“This trans­ac­tion is the best course of ac­tion for Dawn and al­lows us to be­come debt-free,” he said. The sale was key to the im­ple­men­ta­tion of Dawn’s turn­around plan to re­store the busi­ness to prof­itabil­ity, He­witt said. In its an­nual re­sults to March 2016, Dawn posted a R758m net loss. It was fol­lowed by an at­trib­ut­able loss of R637m in the year to March 2017.

The com­pany will rein­vest in stream­lin­ing the core master dis­tri­bu­tion op­er­a­tions, now re­named Dawn Trad­ing.

Dawn’s re­main­ing man­u­fac­tur­ing and trad­ing busi­nesses in­clude pipe and fit­tings mak­ers DPI Plas­tics, Swan Plas­tics and Ubuntu Plas­tics.

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