Chemical Specialities snag hits earnings

7/2/2010 12:40:01 PM

SISEKO NJOBENI

Energy Affairs Editor

ALTX-listed paint manufacturer Chemical Specialities is still in negotiations for its R103m insurance claim regarding its fire-damaged factory, and the outstanding claim is hurting its earnings.

The settlement of the insurance claim, for fire damage to its main automotive paint production facility, is taking longer than the company had anticipated. In its income statement for the six months to September last year, Chemical Specialities said it expected the claim to be settled by the end of the financial year. The company even included the anticipated payout under the “other income” line of its income statement.

“The directors are of the view that no amount should be taken to account in the full year’s results and accordingly have decided to reverse the amount taken to account to 30 September 2009,” the company said this week.

“The loss-adjusted claim submitted to insurers is approximately R103m. The directors remain confident that the claim will be settled and the amount of the settlement will be brought to income statement at time of payment.”

The company said the fire to its production facility had reduced its production capacity for the year to March. It said the lower production had also slowed down sales significantly. But it said there was still strong demand for its products.

Chemical Specialities said the commissioning of its new manufacturing facility in Canelands, KwaZulu-Natal, had increased its production capacity. “The return to normal production at an increased level and the group’s financial position, together with the ultimate settlement of the insurance claim, provide a sound platform for the future.”

The company also told shareholders it expected a loss of about 12,82c per share for the year ended March 31. It expected the headline loss a share for the period to be 12,9c per share. In the previous corresponding period, the company reported headline earnings of 8,05c per share.

The company said it expected the rights offer announced earlier this year to “substantially” strengthen its financial position. The rights issue will raise about R100m, which, it said earlier this year, would be used to repay its short-term debt and improve its working capital.

njobenis@bdfm.co.za