Yesterday saw a run on Siltek shares, with the price dropping to 10c on intra-day trade from a 24c opening, regaining some value to close at 20c.
Although the crash appeared to be in reaction to Siltek's announcement on Wednesday that it is to close its Australian business, Siltek CEO Dave Lello says the drop was sparked by a market rumour that Siltek distribution company SDD was facing liquidation.
The rumour is not true, says Lello, but he admits that Siltek had considered selling the volume distribution division which has been facing decreasing demand and fierce competition.
"We were considering a sale, but we have implemented internal management systems which give us a superior level of control within the business especially from a margins point of view."
Lello says that after considering a number of options, one of which was to sell the division, Siltek decided to hold onto SDD and is confident of a turnaround from the division.
"We are receiving positive feedback from clients regarding our sales force which is charged and ready to recapture the market share we lost to competitors. Things are looking better already."
Commenting on the Australian closure, Lello says the decision to place it under voluntary administration (an Australian version of the US's Chapter 11 bankruptcy) was taken to protect the division from a fire sale - "a real possibility when a company is involved in the distribution game. We want this settled in an orderly fashion."
In a further bid to rationalise operations, Siltek will today vacate its luxury Midrand office building and move to more modest premises.
"This move is one of the strategies we decided on to slim down the business. We will rent the building to arivia.kom."
Lello was unable to comment further on the group's financial standing as it is currently in a closed period.
The share was trading at 19c two hours after trading opened this morning.
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Siltek closes Australian division to stem cash drain
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