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ELB to restructure as SA construction downturn bites

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Depressed trading conditions are forcing the JSE-listed ELB Group to restructure some of its operations, which may include selling off its Australian business.

The company, which manufactures equipment and offers engineering solutions for construction, mining, metal and other industries, said it has decided to restructure its loss-making engineering services business, the second biggest unit in terms of its contribution to ELB’s revenue. The group will also be downsizing of its head office functions and is considering a potential sale of its Australian equipment business, ELB Australasia.

“Following completion of the proposed Initiatives, the company is expected to be appropriately structured for the current market environment and will consist of a market-leading African equipment distribution business offering a range of earthmoving, construction, mining and quarrying equipment from a single supplier; and a restructured and refocused Engineering business operating within a clearly defined area of expertise,” said the company in a statement.

The ELB which generates almost 75% of its revenue from South African operations has been hit by the decline in SA’s construction industry and limited infrastructures spend by government. In its 2019 financial year, the company’s revenue tanked 40% and it suffered a headline loss of 167c a share, from a profit of 386 cents in 2018.

Sales from its Gamsberg Zinc Project fell by 70% last year. In its 2019 annual report, ELB said it did not expect to see major improvements in the markets in which it operates and will, therefore, need to move forward with mitigating strategies which include diversification to reduce its reliance on the minerals and metals sectors.

The proposed restructuring will be subject to shareholders’ and other regulatory approvals. The group said it might need to raise capital to fund the restructuring.

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