8 August 2007
opinion
Johannesburg — CHEAP imports of electrolytic manganese dioxide (EMD) from China and the rising operational costs could adversely affect the profitability of electrical products group Delta Electrical Industries, the company said in its interim report for the six months ended June.
EMD is an indispensable material used in the cathode mixture of high-performance dry batteries.
Delta also cautioned its shareholders that its South African and Australian operations could be affected by "adverse exchange rate movements" of the Australian dollar against the US dollar and the rand.
These three factors - China's cheap imports, high operating costs and the unfavourable exchange rates - have resulted in Delta posting an operating loss of R35,6m in the period under review. The loss had ballooned 46% from the previous loss of R24,3m.
However, the company managed to drastically reduce its net loss to R29,8m from a staggering R89,2m. Headline loss per share was 60,8c.
The company said its loss was also exacerbated by the underrecovery of production overheads totalling R15,2m at its Australian operation.
The under-recovery followed a decision by management to limit production in order to reduce excess stocks.
But China remains top on list of Delta's threats.
"If customers elect to source lower-priced EMD from China for so long as Chinese imports are not subject to antidumping duties, the group is likely to lose sales volumes and will take the steps necessary to preserve shareholder value," the JSE-listed company said.
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