Penrice banks on soda exit
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MELBOURNE, March 1 AAP
March 01 2013, 3:53PM
The first words on Penrice Soda's website boasts that the company is Australia's only manufacturer of soda ash, but its decision to exit this activity might just save it.
Penrice posted a second consecutive $28 million first half loss, driven down by writedowns on its loss-making Adelaide soda ash plant.
Penrice shares fell five per cent to 9.5 cents on Friday, having been at 14.5 cents in January before the closure was revealed.
The dire state of Australia's manufacturing and construction sector led to Penrice deciding to shut the chemical plant in June, costing 60 jobs.
From then it will import soda ash for its customers, which make glass and detergent.
It will keep making more profitable sodium bicarbonate for pharmaceutical and food companies, and operate its marble and limestone mine.
Chief executive Guy Roberts said the company could not get on with its restructure quickly enough.
"The balance sheet is weak, we understand that and we are carrying debt at an unsustainable level," he told an analysts' briefing.
"We are working very closely with the banks ... to restructure the balance sheet."
Penrice's net debt is $98.1 million, from $93.6 million six months earlier.
Shareholders equity is negative $25.9 million, following a $21.2 million plant impairment, meaning its liabilities are greater than its assets.
It has struck a joint venture with Dutch-owned soda ash distributor SASS.
Mr Roberts said the joint venture removed the high fixed costs of a manufacturing plant so Penrice could be flexible about importing enough soda ash to meet demand.
Forecast earnings next year were expected to be materially better, returning the soda ash business to profitability, he said.
Mr Roberts described the construction industry as woeful, hurting Penrice's quarry products, and had no confidence about when the market would pick up from the bottom.
Mr Roberts was more bullish about Penrice's deal with industrial giant GE to offer the controversial coal seam gas industry technology to remove salt from its wastewater and address environmental concerns.
He said it was hoped Penrice would build the industry's first commercial salt-processing plant this year.
By Greg Roberts