Ansell Cuts Value Of Australian Goodyear JV
Australia’s Ansell Ltd has slashed the value of its tyre-making joint venture with Goodyear Tire & Rubber Co by more than half, citing the impact of an influx of cheaper imports and rising raw material costs. In a move largely factored into analysts’ estimates, Ansell said it plans to write down the carrying value of its investment in South Pacific Tyres, or SPT, by $80 million Australian dollars to about A$58 million.
Ansell, which has already flagged a possible exit from the troubled investment over the next year so that it can focus on its faster-growing condoms and latex gloves businesses, said the writedown is non-cash and will be taken when its fiscal 2005 results are released in August.
The company also has a previously disclosed outstanding A$66 million loan to the business, which is expected to be repaid in full on Ansell’s exit from the business.
“SPT’s fiscal 2005 second-half performance has significantly lagged behind forecast with a continuing increase in low price imported tyres, and significant increases in raw material costs,” Ansell said in a statement.
Ansell, which is the world’s largest maker of latex surgical gloves and second-biggest maker of condoms, declined to comment further.
Under an existing agreement with Goodyear, Ansell has a co-called put option to sell its half share in SPT back to Goodyear between August 2005 and August 2006 at a price based on an agreed formula. Failing that, Goodyear can force Ansell to sell its stake between September 2006 and February 2007.
Like other producers around the world, SPT has also faced higher prices of natural rubbers, synthetic rubber, steel cord used in tyres and other raw materials. In an effort to turnaround its performance, SPT has closed several plants, reduced staff and focused on selling higher-margin products. It currently makes more than 70,000 tyres a week at its main plant in the Melbourne suburb of Somerton.