Small-cap metal alloys supplier Insimbi Industrial says surging commodity prices helped it more than double profit in 2022, but it is withholding a dividend because of high levels of global uncertainty.
Group profit jumped 138% to R104.2m in its year to end-February, more than triple pre-pandemic levels as the company benefited from surging dollar-priced commodity prices that helped both export and local revenue.
Insimbi, valued at R472m on the JSE, supplies alloys to the steel sector, as well as ceramic refractory linings to the cement, paper and pulp, steel and platinum industries. It operates from premises in Johannesburg, Cape Town and Durban, with local sales making up about 85% of revenue.
Commodity prices surged in late 2021 and in 2022 as many economies recovered from Covid-19. Russia’s invasion of Ukraine has pushed up prices further but the war is also cutting into the global economic outlook as central banks aggressively react to rising inflation.
Insimbi CEO Frederick Botha said the results underscored the benefits of its diversification strategy, which had also built scale. The company bought Treppo Group for an initial R109m in late 2019, making it one of SA’s largest recycled ferrous metal groups.
“While this has contributed significantly to our growing local, regional and global footprint as well as diversification, the timing meant that integration was effectively delayed for a year due to the impact of the Covid-19 pandemic and resultant lockdowns,” said Botha.
Treppo performed below targets as a result, said Botha, but once fully integrated, the business is expected to make a valuable and sustainable contribution to group results.
Insimbi more than doubled annual operating profit to R207m, but it also reported an 11% increase in operating expenses to R386m, with fuel and toll expenses up 10%, insurance 25%, repairs and maintenance 20%, and employee costs 14%.
The increase in staff costs is largely due to the salary sacrifices that were made by all employees in the prior year due to Covid-19. Net debt fell almost a quarter to R492.7m, remaining above the company’s present market value.
Insimbi said it is focused on finding the appropriate balance for maintaining sales in the face of rising raw material costs, and is confident about its year ahead.
By the JSE’s close Insimbi’s share price was up 1.79% to R1.14, having risen 14% so far in 2022 and by 80% over the past two years.
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