Andulela Investment Holdings (previously DNR Capital) is a holding company with mining and steel processing interests, listed on the Equity Investment Instruments sector of the Johannesburg Stock Exchange (JSE). The group’s portfolio includes two trade subsidiaries, namely Kilken Platinum (which it owns an 83.59% stake in) and Pro Roof Steel Merchants, which it owns 100% of.

Kilken Platinum is a profitable, low-cost producer and seller of platinum and group metals such as rhodium, pallodium and gold, and is Andulela’s principal strategic investment.

Meanwhile, Pro Roof Steel is one of the largest and most well-recognised steel processors and merchants in South Africa.

The company today has a market cap of around R 33 million. Andulela share prices are currently at their lowest levels since 2013, due to instability in the mining sector, low commodity prices and South Africa’s unstable economy. Operating losses stood at R2.5 million for 2015, with headline losses per share coming in at more than 18 cents.

The group’s growth and Andulela share prices are largely dependent on commodity prices and the state of the Rand. Instability and weakness in these two key areas have contributed to some of the largest losses in the group’s history. Although the early months of 2016 saw some stability in commodity prices, the overall forecast is that trade in the steel and construction industry will remain subdued due to low levels of demand, low global steel prices, an oversupply of steel products and a continued weak Rand. Platinum and palladium prices have plunged by an average of 30%, whilst steel producers such as Pro Roof Steel have had to slash their prices to compete with cheaper Chinese importers. Despite this, the two subsidiaries both managed to up their revenue in 2015.

To return the group to profitability, capital expenditure has been approved to improve efficiencies, manage cost structures, lower production costs and reduce debt. Due to the tough market environment, Andulela has had to turn down several investment opportunities which it had identified to diversify its operations.

Andulela seeks to hold primarily South African strategic investments in mining and metals companies.  

Overall, the company’s operations are based on capitalising on tailings retreatment in the platinum sector, while the goal is to expand its investment across the base and precious metals industry.  

Andulela share prices have taken a huge blow over the past year, with the chart showing a dramatic decline from around 220 cents per share in June 2015, to around 40 cents per share in May 2016. The outlook looks marginally brighter for the short-term future, but will not herald noticeable increases in share price, or be enough to reverse operating losses. With commodity prices likely to remain subdued, and the South African steel industry in turmoil, most analysts agree that Andulela shares are not a good purchase at present. The company has however made clear that it is an investment holding company, which will hopefully assure investors that it will diversify into other profitable operating assets.

Financials

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