Turn­ing it­self around?

Finweek English Edition - - COMPANIES&MARKETS - LEANI WES­SELS leaniw@fin­media24.com

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.

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