Within the CSI Group Global Roofing Solutions remains profitable. Management fed up with Arcelor Mittal South Africa and are to source material internationally in future.
269 employees are casualties because of Section 189 implementation.
Stalcor, once one of the top three Tier 1 distributors of stainless steel and aluminium products in South Africa, servicing customers in the fabrication sector and steel merchants, looks set to be closed as a result of parent company – Consolidated Steel Industries (CSI) – going into business rescue and a subsequent legal demand by a creditor, as well as trading complications during COVID-19.
On 13 July 2020 the CSI management team made an announcement that the company went into voluntary business rescue.
The statement said: “This was the only way to save the whole business as the COVID-19 lockdown triggered a huge cash shortfall. The alternative to going into Business Rescue was the immediate liquidation and closure of CSI. This would have resulted in the loss of all 769 jobs at CSI. Faced with this reality, the Business Rescue Practitioners (BRPs) and CSI management team pledged to save as many jobs as possible.”
Stalcor looks set to be a victim of Consolidated Steel Industries’ business rescue plan
“Due to the protection that the Business Rescue process has provided CSI since July we have been able to offer employment to almost two thirds of the CSI workforce. During this time, the BRPs and the management team have worked tirelessly to restructure and find a buyer for the Stalcor division, which has been losing a lot of money as this business has been suffering from the effects of a depressed steel market and lower margin sales.”
“Combined with the weak economy and the COVID-19 pandemic, the continuation of the Stalcor business has become an increasing threat to the overall survival of the CSI business and everyone’s job. This is why we had to urgently find a buyer for Stalcor. To date, not one of the potential bidders for Stalcor made an acceptable offer for the business which reflected its real value, despite the fact that we worked day and night to find one.”
Within the CSI Group is Global Roofing Solutions
In a later statement management said: “On Thursday 29 October 2020, the management team and the BRPs received a legal instruction from one of the companies we owe money to, to sell all of the Stalcor stock over which they have security in the form of a perfected General Notarial Bond (GNB). This sale of stock was an agreed transaction between the security holder and the buyer of the stock. As we take steps to save the business, this sale of stock has resulted in realising the value for these slow-moving items in a deteriorating marketplace for Stalcor.”
In a further statement issued it was said: “Regrettably, the major portion of the Company’s cost-base at the time of Business Rescue comprised ‘payroll costs’, which, under the circumstances of significantly reduced sales and trading forecasts, could no longer be commercially justified. In accordance with the Labour Relations Act and in consultation with employees and their representative Unions, the Company concluded a Section 189 process by 31 August 2020, which led to the redundancy of 269 employees at that date. By agreement, the retrenchment settlements payable to all affected employees will be paid in four monthly tranches ending 31 December 2020.”
Global Roofing Solutions
Within the CSI Group is Global Roofing Solutions (Pty) Ltd, which consists of two leading South African roofing material manufacturing operations, GRS Brownbuilt (established in 1964) and GRS HH Robertson (established in 1958), making it one of the largest metal roofing manufacturers in South Africa.
CSI management and the BRPs have made saving this business a priority.
Status update on the business rescue of CSI – 24 November 2020
“On Thursday 19 November 2020 we were informed that the material flow prognosis from Arcelor Mittal South Africa (AMSA) has deteriorated following their strike on Monday 16 November 2020, which resulted in a delayed return to work. AMSA have also advised us that there appear to be a number of equipment and production-related issues which are likely to result in serious adverse consequences for material supply for the remainder of the year.”
“Needless to say, this news was met with shock by the steel industry in general, as the industry had been led to believe that AMSA was on the road to recovery and that November was likely to see a return to a somewhat normalised level of supply. The steel industry places enormous reliance on AMSA for supply, with CSI, for one, having traditionally relied on AMSA for approximately 70% of the value of its raw materials purchases.”
Stalcor, once one of the top three Tier 1 distributors of stainless steel and aluminium products in South Africa, servicing customers in the fabrication sector and steel merchants, looks set to be closed. With no staff and no product to sell there can only be one conclusion
“Since these developments the CSI management team and the BRPs have acted with speed to proactively manage this situation in order to protect our creditors and customers’ interests. To this end, the following measures are being implemented with immediate effect in order to mitigate the negative financial effect of the AMSA crisis: The import programme which commenced two and a half months ago is being expanded and accelerated with the intention that Global Roofing Solutions should not have to rely on local supply in order to operate profitably; A bonded warehouse facility is being investigated to maximise the utilisation of import credit facilities; In light of the now significantly impaired November/December/January outlook, the GRS short-term financial forecasts are in the process of being re-worked to limit the extent of the inevitable financial loss as much as possible. Once the forecasts have been re-worked, we expect to introduce a number of measures including further deep cost cutting and further strategies to generate possible margin improvement, which will be rolled out in line with the forecasts.”
The statement goes on to mention various other measures that are being taken and the various milestones that have been achieved to rescue GRS, since the commencement of the business rescue of CSI began.
What is clear though, although not officially announced in the statements, is that the Stalcor business is being separated from GRS and will ultimately be liquidated. With no staff and no product to sell there can only be one conclusion.