Sallies Limited - Sallies still struggles against strong rand
Sallies Limited
(Incorporated in the Republic of South Africa)
Registration number 1903/001879/06
JSE Share Code: SAL
ISIN: ZAE000022588
For further information call
Lindsay Robertson on 082 807 7709
SALLIES STILL STRUGGLES AGAINST STRONG RAND
Johannesburg, 14 September 2005 - A strong operational performance by fluorspar
miner Sallies was again negated by an unfavourable exchange rate and an onerous
contract over the past year, the company said today.
Reporting a loss of R30.9 million for the 12 months to June, Sallies noted that
there had been a slight easing of its tough trading conditions in the latter
half of the year, when the rand had weakened somewhat. Major customer Honeywell
had also improved its payment terms which, while not affecting the company`s
profitability, had enhanced its cash flow.
Virtually all of Sallie`s production is exported at dollar-denominated prices,
over half of it to Honeywell in terms of a five-year supply agreement which caps
the price at US$116/tonne, well below the current spot price of around
US$170/tonne and loss-making at prevailing exchange rate levels. At the half-
year, this agreement was defined as an `onerous contract` in terms of South
African GAAP and a provision of R22.7 million was made for the projected loss to
completion. This provision was reduced to R9.4 million at the year-end in the
light of the relative improvement in trading conditions.
Chief executive Lindsay Robertson said the Honeywell supply agreement would be
completed by the end of 2006. Until then, Sallies would remain exposed to the
exchange rate, requiring an average of R6.50 to the dollar to be modestly
profitable.
`Our Witkop mine again improved its performance over the past 12 months,
increasing production by almost 40% over the previous year. US dollar revenue
also increased by the same percentage assisted by a 14% increase in US dollar
prices. Unfortunately, we were swimming against the tide of a strong rand,
which effectively reversed our real operational advances,` Robertson said.
Issued by du Plessis Associates on behalf of Sallies Limited. dPA contact Helen
McKane on Tel: +27 11 728 4701, Fax: +27 11 728 2547 or e-mail:
sallies@dpapr.com
Date: 14/09/2005 12:25:29 PM
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