Soda hopes to rise again

By InvestSMART · 13 Nov 2013

By InvestSMART ·
13 Nov 2013

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Penrice Soda is confident the worst is behind it as cash flow improves following $140 million of losses in the past three years. At its June 30 balance date, liabilities exceeded assets by $46.6 million, resulting in auditor Ernst & Young qualifying its accounts for the second year running due to "material uncertainty ... about the ... group's ability to continue as going concerns", it said in the annual report.

Chairman David Trebeck told shareholders at Tuesday's annual meeting that liquidity remained tight, "further challenged by lumpiness in individual expenditure and revenue items".

A debt restructure was being negotiated. Penrice has $110 million of debt and $127.5 million of accumulated losses. The company's forecast for the rest of the financial year is for "a modest, but gradually improving ... positive net free cash flow."

A strong dollar, weak demand and product prices forced the group to close its soda ash plant and shift to imports. Its future now hinges on developing the quicklime market, renegotiating debt and recapitalising.

In the year to June, the loss per share totalled 54.8¢, down from the loss of 69.6¢ a share a year earlier. The net loss fell to $50.1 million from $63.5 million.

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Frequently Asked Questions about this Article…

What challenges has Penrice Soda faced in recent years?

Penrice Soda has faced significant challenges, including $140 million in losses over the past three years, liabilities exceeding assets by $46.6 million, and a qualified audit report due to material uncertainty about its ability to continue as a going concern.

How is Penrice Soda planning to improve its financial situation?

Penrice Soda is working on a debt restructure and aims to achieve a modest but gradually improving positive net free cash flow for the rest of the financial year.

What impact did the strong dollar and weak demand have on Penrice Soda?

The strong dollar and weak demand, along with low product prices, forced Penrice Soda to close its soda ash plant and shift to importing soda ash.

What is Penrice Soda's strategy for future growth?

Penrice Soda's future growth strategy involves developing the quicklime market, renegotiating debt, and recapitalizing the company.

How has Penrice Soda's financial performance changed over the past year?

In the year to June, Penrice Soda's loss per share decreased to 54.8 cents from 69.6 cents a year earlier, and the net loss fell to $50.1 million from $63.5 million.

What did the auditors say about Penrice Soda's financial health?

Auditors Ernst & Young qualified Penrice Soda's accounts for the second year running, citing material uncertainty about the group's ability to continue as a going concern.

What are the key factors affecting Penrice Soda's liquidity?

Penrice Soda's liquidity remains tight, further challenged by lumpiness in individual expenditure and revenue items, according to Chairman David Trebeck.

What is the current debt situation for Penrice Soda?

Penrice Soda currently has $110 million of debt and $127.5 million of accumulated losses, which it is working to restructure.