Turning itself around?
THE CEMENT and aggregates industry has been keeping a close eye on the fortunes of teetering WG Wearne. Every player with an interest or ambition for cement production is intimately aware of the opportunities (a national footprint) and the risks (sky-high debt levels, old plant) this group can offer. However, it’s the end of an era of speculation for Finweek, with the group’s announcement it had received an R85,2m loan from the Industrial Development Corporation (IDC) in exchange for a 30% interest in the group.
Suddenly it looks as if it can actually pull through and the vultures are slowly dispersing. WG Wearne’s desperate measures to lessen its debt and improve earnings included getting rid of its pricey 2009 acquisition (the Portland Group), applying for a debt moratorium with its creditors and currently – the ultimate put-off for opportunistic buyers – the IDC loan was announced.
Its 2010 financial year saw debt levels hit R300m, cash flow was tight and its operating loss of R26m had industry players speculating when the group would de-list and leave the Wearne family with a seriously discounted investment. Or sell the silver to the next best company.
Enter the specialist turnaround team and the future starts to look clearer. According to group financial director Alan Bruens, the IDC monies will be used for plant maintenance and some working capital requirements. Bruens wouldn’t comment on whether the group has seen any interest for its assets from other firms.
Apart from that wobble when WG Wearne took on the Portland acquisition, the cement industry as a whole is still looking too weak to nurture an epic turnaround story. However, when the cycle turns and Wearne has shaped up its balance sheet, the group will be able to use its national presence (a valuable commodity in the cement game) and its established name to slot back into the habit of again making hard cash.