Business update in respect of Capital Africa Steel (Pty) Ltd
Wilson Bayly Holmes-Ovcon Limited
(Incorporated in the Republic of South Africa)
(Registration number 1982/011014/06)
Share code: WBO
BUSINESS UPDATE IN RESPECT OF CAPITAL AFRICA STEEL (PTY) LTD
The Directors of Wilson Bayly Holmes-Ovcon Limited (WBHO) wish to advise shareholders of the effects of production constraints and adverse trading conditions on the value of non-current assets on the group’s balance sheet in respect of its construction materials segment and more specifically the pipe mill, Capital Star Steel S.A. (CSS) in Mozambique.
CSS is a subsidiary of Capital Africa Steel (Pty) Ltd (CAS), the company through which WBHO operates its construction materials businesses. As reported at 31 December 2013, the profitability of CSS was severely affected by various production stoppages which have continued into the second half of the year. CAS has provided CSS with working capital funding to the value of R120 million in support of two recovery plans. The required production outputs from these recovery plans have not been achieved.
Furthermore, aggressive competition in the international project pipe market has affected the future operations of CSS.
It is expected that the cumulative effects of the above will result in the economic value of the assets of CSS being materially less than their current carrying amount of R539 million, resulting in an impairment thereof.
The impairment will affect earnings per share however the headline earnings per share of the group will not be affected.
The above information has not been reviewed or reported on by the group`s auditors.
27 June 2014
Sponsor: Investec Bank Limited