Labat Africa, which has one remaining business unit, says Koedoespoort production will cease and manufacture of integrated circuits will be moved to China.
The company reported revenue substantially down in the year to February, at R42.2 million, compared with R154.6 million last year, as operations were discontinued. It made a R19.5 million loss before tax, sale and fair value adjustments, compared with a R24 million gain last year.
However, a fair value adjustment on property of R17.3 million and the unbundling of Total Client Services (TCS), which resulted in an accounting profit of R48.8 million, improved earnings per share from last year's loss per share of 0.4c to a gain of 29.2c.
After unbundling TCS and distributing its shares to shareholders, Labat is left with one remaining operating business, South African Micro-Electronic Systems (Sames).
Sames, according to its Web site, is the only commercial semiconductor manufacturing facility in Africa. It designs, manufactures and markets high-performance analogue and mixed signal integrated circuits for industries such as telecommunications.
However, stripping out exceptional items resulted in a widening headline loss per share, which increased from 0.5c last year to 5.1c. Labat did not declare a dividend.
Absa Investment analyst Chris Gilmour says the company “has been a thoroughly disappointing performer”. From trading at R1.60 in 1999, the company's shares are now trading at 4c, he points out.
Competition
Although the company has tried to manufacture integrated circuits (ICs) profitably at its plant in Koedoespoort, Pretoria, the challenging environment has left it with no choice but to move operations to China.
However, staff will be redeployed and “redundancies will be kept to a minimum”. The existing premise will be used for a new venture, it says. Labat says it faced challenging market conditions, aggressive competition from China and the strength of the rand. Gilmour says moving manufacturing to China will give it input cost benefits.
“We have been aware for some time that the manufacture of ICs in the existing facility would not be sustainable in the long term and have explored many alternative uses for the facility,” Labat says.
The facilities, especially the clean room and clean water plant, can be used for a variety of other applications and Labat will focus on establishing an active pharmaceutical ingredient facility and a pharmaceutical formulation facility.
“Our investigations to date have confirmed these facilities can be converted to supply the bulk of the ARV drugs required in SA,” the company says.
Secondary uses include a micro-electro-mechanical-systems facility and the production of health and mineral waters.
“In the meantime, we will continue with our two existing operating divisions, ICDC and Elsec, our security hardware manufacturer,” says Labat. Surplus plant and equipment will be sold and the proceeds used to fund the change to new business ventures, for which it has identified partners.
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