Eqstra earnings slide on Protech liquidation

2014-09-03 12:35

Failed construction and engineering group Protech Khuthele has taken more than a quarter of Eqstra’s earnings down with it.

This contributed to dampened results that have prompted its largest shareholder not to pay dividends for the first time in three years.

Yesterday, Eqstra – a contract miner which also services clients in the construction, mining, industrial and commercial sectors – released results showing it made R9.9 billion in the year to June. But pretax profit was at R269 million, a 44.7% plunge from the previous period.

Eqstra blamed this on weak performance from its contract mining and plant rental division, and the impairment (write off) of its investment in Protech.

The company was forced to write off R63 million due to its 32.8% ownership in the small construction company, which folded earlier this year. Protech applied for business rescue following demands for immediate repayment for project expenses, which it was unable to pay due to cash flow constraints. It is now in liquidation.

“[Eqstra’s] results were highly affected by ... Protech,” said Miyelani Mkhabela, executive director at Antswisa Management Group. “They were supposed to report profit before tax of R332 million, and the impairment took results down to R269 million.”

He added that Eqstra also lost R130 million owing to an industry strike and millions more from a rain catastrophe at two of their mines.

“Eqstra should have got strategic advice by 2012 when Protech started losing much on the order book, and [added] leadership that can originate deals and sustain the company.”

But last year, Eqstra attempted to swallow Protech in a “hostile” R146.2 million takeover, which ultimately failed.

In an interview on CNBC Africa’s Power Lunch show yesterday, Eqstra boss Walter Hill indicated his company was weighing up its options to pursue a case against Protech’s former directors.

“We are talking to the liquidator and establishing the facts,” said Hill.

“Yes, there are fiduciary responsibilities on the directors and it is a matter that will have to be tested and proven. Yes, we are keeping the options open and sitting down with the liquidator to establish exactly why the original offer was not accepted and how they came about the 90 cents per share offer versus what we believe (till today) that 60 cents was good, but today it’s worthless.”

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