DISCONTINUATION Delta EMD plans to discontinue its operations this year
JSE-listed electrolytic manganese dioxide (EMD) manufacturer and supplier to the global alkaline battery industry Delta EMD intends to discontinue its operations and sell its assets, subject to shareholder approval, given the declining state of the global EMD market and the company’s deteriorating financial performance.
In a statement released this month, Delta EMD said it plans to discontinue its operations, in 2014, and sell its assets, during 2014 and 2015, in Nelspruit, Mpumalanga, Black Rock, in the Northern Cape, and Newcastle, in Australia.
The company says it has considered a number of strategic options, including the sale of the business, a change in strategy, and discontinuation; however, an investigation of alternative strategies had not identified attractive investment opportunities.
While efforts to sell the business had not been successful, the company would consider any further interest from buyers, even if its several sites were of interest to different buyers.
Other factors contributing to Delta EMD’s decision includes global EMD capacity exceeding demand in the declining market – resulting in lower global EMD selling prices, the continued imposition of antidumping duties on Delta EMD’s exports to certain geographies, international battery producers’ preference for domestic supply, the increasing cost of doing business, the company’s limited competitive advantages and a requirement for substantial capital expenditure to sustain Delta EMD’s operations.
A substantial North American customer, as announced by the company on January 24, also recently decided to significantly reduce its demand.
The shutting down of EMD production, if approved by Delta EMD’s shareholders, would be done in a phased manner after producing adequate inventory to supply customers with their committed volumes and allow the orderly transition of their supply arrangements.
The orderly discontinuance of the business and sale of its assets would also provide the company with the resources necessary to decommission its sites in a responsible manner, assist employees with outplacement and provide severance.
Delta EMD currently employs 177 employees – 156 in Nelspruit and 21 in Black Rock.
Trade union Solidarity spokesperson Quintus Sliep said in a statement that the trade union, which represents 39 of the company’s employees, was already involved in talks with Delta EMD.
“Solidarity will do everything in its power to protect its members and assist them in this process,” he says.
The company, held by private company Valmont EMD Holdings, would provide shareholders with a memorandum, setting out in detail the rationale for the decision, during April, as well as release a notice of Delta EMD’s annual general meeting.