Charlotte Mathews
13 November 2008
Johannesburg — COMMODITIES trader and investor Metmar yesterday posted record first-half revenue and profit despite a slowdown in the commodities sector but warned that conditions would become more difficult in the second half of the year.
Metmar's core business is commodity trading, but it does not take speculative positions in commodities.
It also owns minority investment stakes in manganese and manganese alloy operations, zinc mining, and other commodity businesses in the rest of Africa.
Revenue almost doubled to R2,1bn in the six months to August from R1,1bn in the same period last year, reflecting higher volumes of trading, stronger commodities prices during the period and a weakening rand- dollar exchange rate.
Operating profit more than doubled to R96,9m and headline earnings rose 248% to 263,3c per share. Metmar's policy is to declare a dividend only at year-end .
Although trade receivables more than doubled to R634m from R256m and interest-bearing borrowings surged to R39,6m from less than R1m a year ago, Metmar CE David Ellwood said this was not worrying because it reflected the higher commodity prices in the first half of the year. Metmar ran "a pretty tight ship" in securing payment from its debtors.
It is due to receive about R320m in the second half of the year from the sale of its interest in manganese alloy business, Mogale Alloys, to Kermas SA, a deal which is waiting for approval from the competition authorities.
Ellwood said Metmar's final dividend was not in jeopardy.
Although the board was still to make a decision, it was likely that some of the proceeds of the Mogale disposal would be distributed to shareholders.
But Metmar also wanted to preserve cash to take advantage of the acquisition opportunities that were likely to arise in the current market turmoil. Metmar's recently acquired polymers business, WAG, was performing well and the vendors had warranted certain profits in the next three years would not be less than R16m a year, otherwise the purchase price would be reduced.
Metmar was also deriving substantial benefit from its 11,6% stake in Kalahari Resources, from which it had recently received a cash dividend of R26m, Ellwood said.
The Kivu project, which is exploring for tin, tantalum and tungsten in Rwanda and the eastern Democratic Republic of Congo, was making progress, and military unrest in the eastern Congo was not affecting its activities.
Metmar's shares, which touched a peak of 695c in early June, have fallen in line with other resources shares and equities in general.
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