In 2013, one of the largest brick makers in SA was put under provisional liquidation, but it has been rebuilt
In the middle of the maize fields just outside the small town of Nigel in Ekurhuleni, hundreds of workers in blue overalls make almost 700 000 clay bricks a day. Here, at Brikor’s Plant 1, surrounded by rows of stacked bricks that look like sprawling, flat pyramids, new CEO Garnett Parkin Jr drives around in his shiny black Land Rover.
Wherever he goes, Parkin is greeted by smiling workers. They are smiling for a reason – a preliminary liquidation order that was hanging over the heads of almost 1 000 Brikor employees like a dark cloud was set aside earlier this year.
It’s difficult to believe that seven years ago, some of these friendly workers took part in a bloody fourmonth-long strike at the company.
Brikor seems to be the first and only JSE-listed company on record that has managed to have a preliminary liquidation order set aside.
Many of the workers at Brikor have known Parkin since he was a boy who helped them stack bricks in the sun at the very same brick plant during his school holidays.
Brikor listed on the JSE’s AltX stock exchange in August 2007 and was at one point the second-largest brick manufacturer in the country, with about 1 600 employees.
At that point, the company had seven plants in different parts of the country that, among other things, manufactured clay pipes and roof tiles, and it had stone quarries in KwaZulu-Natal.
A year after the company listed, its net profit after tax doubled to R73 million. It was the heyday of the construction industry and the economy in general – no one foresaw the approaching financial crisis.
The Brikor board decided to borrow millions of rands for acquisitions that were supposed to extend and diversify the company’s activities.
Then, in the last months of 2008, Brikor was hit by dramatic strike action. Two opposing unions were fighting for recognition and salary increases.
The company’s production plummeted during the strike and a contract worker was burnt to death by striking employees.
By the time production recovered after the strike, South Africa was in a recession and the construction industry had collapsed. Brikor’s earnings and share price plunged, together with the entire construction industry.
For the financial year to end February 2009, Brikor recorded a net loss after tax of R35.9 million. As a consequence, the company had to restructure to extinguish its debts.
“We have made some bad management decisions in the past by laying off people who were central to the company,” said Hanleu Botha, Brikor’s financial director.
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She said this happened because, after listing, the company appointed directors who didn’t understand the core business of the company.
Parkin said that when the workforce was restructured, these directors were the first to go.
“My father [Garnett Parkin Sr] said that for every director I let go, I could save 100 other people’s jobs.”
He said the decision was made to return to the core business of clay bricks, and four plants were sold in the process.
“We learnt from the strike and have changed how we approach our employees,” said Parkin.
He said that as many workers as possible were kept on during the restructuring process, and during this time they had no resignations.
They also gave recognition to both the National Union of Mineworkers and the Association of Mineworkers and Construction Union, which was a new union at the time.
“We were also transparent. No one ever wondered about what was going to happen next,” he said.
However, in August 2013, Brikor was placed under provisional liquidation after a dispute with its financier FNB about the ratio of its profits to debts.
Trading in Brikor shares was also suspended. When trading was suspended, the price per share was 9c – a far cry from the R2 per share that was reached on the day the company listed.
The last unaudited interim results published shortly afterwards, however, showed that the company’s restructuring before the provisional liquidation had already borne fruit.
By June this year, Brikor’s finances had improved to such an extent that it reached an agreement with FNB to make a payment of R105 million to service its debt.
As a result, the preliminary liquidation order was set aside on October 2.
Unfortunately, Parkin Sr was killed in an accident in January before he could see the order set aside, and his son took over the reins as CEO on November 11.
According to Allan Pellow, an insolvency practitioner at Westrust and Brikor’s main liquidator, the level of cooperation between Brikor management, unions and employees was astounding compared with other liquidations he had worked on.
“A miracle happened here,” said Pellow on October 8 in the Springs civic centre, where a party was held to celebrate the end of the provisional liquidation.
In spite of the weak economy and floundering construction industry, Parkin is confident that Brikor has the competitive edge in the market.
“We are self-sufficient because we mine our own clay and coal, and we have a very committed and productive workforce.”
Botha said Brikor should be able to publish its financial results for the years 2013, 2014 and 2015 by February.
Only after this has been done will the JSE be able to decide whether Brikor shares can be traded again.
BACK TO BUSINESS Garnett Parkin (right), the new CEO of Brikor, with Chance Mosehle, one of the workers at Brikor’s Plant 1 outside Nigel in Ekurhuleni