Argent feels tough economic conditions

Argent Industrial, a steel-based beneficiation group, has restructured its business following a “difficult year” caused by the depressed economy.

The group restructured, closed or impaired some of its local businesses, including the Sentech motor component operations. Manufacturing is the biggest activity of the company, which operates factories in SA, the UK and US.

The reduction in the value of its plant and equipment of R275m left it with an attributable loss of R184m in the year to March 2018, from profit of R63m in 2017.

“The restructuring and the expected returns on the group’s overseas operations will, however, hold the group in good stead in the year ahead,” Argent said on Thursday.

The group’s three overseas manufacturing companies were the biggest contributor in the period, making a combined profit of R27.2m before tax, including a R5.7m unrealised foreign-exchange loss.

The company makes and sells a wide range of branded products, including for railways, doors and gates.

Its South African businesses include Jetmaster fireplaces and Gammid Cape, a stockist of aluminium and stainless steel, including sheets, plates, coils, extruded sections and semifabricated products.

Both companies have been relocated into smaller premises. “This has had a positive effect on the reduction of costs and related overheads,” Argent said.

The Toolroom Services unit was downsized due to a downturn in steel office furniture.

However, at half its size it has returned to profitability and has been combined with Xpanda security products in Johannesburg.

Anthony Clark, an analyst at Vunani Securities, said on Thursday that Argent’s underlying earnings, excluding one-offs, were “commendable”, particularly in the face of rand volatility.

However, he said management had returned little to investors over many years by way of dividends, despite the group’s extremely low gearing, and had engaged in “insignificant” share buy-backs over this time. Clark said there were likely to be further impairments, although assets would be hard to sell in SA’s poor economy.

“There is no compelling reason to invest in Argent,” he said.