Penrice Soda Holdings Ltd. reported that soda ash and sodium bicarbonate prices are strengthening, although the company“s earnings are behind plan.
Last financial year, the company was forced to div…
Penrice Soda Holdings Ltd. reported that soda ash and sodium bicarbonate prices are strengthening, although the company“s earnings are behind plan. Last financial year, the company was forced to divert substantial amounts of soda ash to relatively unprofitable spot markets overseas because of lower demand from its most important glass customers during the global financial crisis. According to company Chairman David Trebeck, prices for the company“s products were improving after bottoming out, but a recent shutdown of the Osborne chemicals plant had affected its profit forecast. As a result, first half earnings could be behind the corresponding period last year, Trebeck said during the Adelaide-based company“s annual general meeting. As previously advised, cash flow will be negative in the first half. With the improvement in market conditions in the chemicals business and an appropriate focus on cash management, free cash flow for the full year is anticipated to be positive and a significant improvement on the previous year. Trebeck added that a weak US dollar had been a factor in commodity price strength, adding that the company had about four million tonnes (Mt) of stocks compared with annual demand of about 1Mt. his means that extraction rates were likely to average around 80% of projected sales over the next five years. Trebeck went on to say that a previously mentioned 25% expansion of the company“s sodium bicarbonate plant would be beneficial at the right time, but shareholders were worried that Penrice“s balance sheet might not be able to cover this expense. At the same time, as we have witnessed in recent weeks, the soda ash plant is not operating as reliably as we would wish. In an ideal world, we would like to accelerate the process of plant maintenance.