Tiwheel Results Show Headline Loss
South African alloy wheel maker Tiwheel (Tiger Wheels Limited), majority shareholder in ATS Light Alloy Wheels, have reported £0.085 in headline loss per share for the interim six month period ending December compared with headline earnings per share of £0.046 the same time last year. The company’s revenue grew from 1.17 billion rand (£77.8 million) to 1.60 billion rand (£111.4 million) while 30.3 million rand (£2.1 million) was reported in operating loss compared with 8.6 million rand (£598,700).
Tiwheel has described the results as ‘disappointing’ and attributed them mainly to an accumulation of problems at its Kentucky, USA, facility. The problems referred to occurred at the Kentucky plant in November and December 2006 and according to the group were caused by a combination of management mistakes and market circumstances.
A statement released by Tiwheel group executive director Eddie Kelzan and group financial director Josh Loots on behalf of the board reports “The plant’s main customer, Ford Motor Co, brought the launch date of a new model forward by two months and, as a result, the Kentucky plant was unable to deliver the required volumes to their production lines on time. As is a supplier’s obligation in the auto supply industry, huge costs were incurred in airfreight, special expedited truck deliveries and slave wheel programmes to keep the production lines running.” The total cost of the problems in Kentucky is said to be in the area of £3.8 million.
The statement added that “all other plants in the group experienced, to a varying extent, both volume and/or margin shortfalls to budget. Volume shortfalls were mainly caused by the combination of delays in new model introductions by major customers, and end-of-model life on some OEM contracts.” This situation applies in particular to the company’s plants in Alabama and South Africa, where margin shortfalls were “prompted by certain plant inefficiencies.”
As a result of the poor first-half results certain bank covenants were breached. These breaches have been waived by the groups’ bankers, who have granted the company 12 months to rectify them. Tiwheel’s management is confident that this December 2007 deadline will be met.”
Looking ahead to 2007, the company expects that the anticipated earnings gained from its European operations during the second half of the financial year will not be sufficient to offset the losses incurred that its US and South African plants. As a result, the results for the full financial year will show a small increase in the headline share shown during the half-year. On a more positive note, based on its known order book the group is forecasting a 20 per cent increase in output for the June 2008 financial year. Overtime, the group believes, this should lead to a return to acceptable profit levels.