Steelnet mulls rights offer

Steelnet first proposed the US$7 million rights during the beginning of last year but it was suspended in the third quarter.
Incidentally it is the same quarter when SMM Holdings reduced its stake in the firm to 11 percent through the sale of 90 million shares to Equivest at US0,37c.
The plan to reconsider a rights offer has come at a time when the group was contemplating selling one of its divisions, Tube & Pipe to Africa Steel to raise working capital.
Tube & Pipe, which produces seam welded steel pipes, largely for the mining and manufacturing industries is wholly owned by Steelnet.
“The company is reconsidering the rights offer and KM Financial Solutions has been doing an exercise to establish how much is needed to recapitalise Steelnet,” said one source who requested anonymity.
Efforts to get a comment from managing director Mr Anthony Mutemi proved fruitless.
Steelnet chairman Mr Chirandu Dhlembeu said recently the company’s ability to continue as a going concern was under threat due to losses incurred during the previous years and the possibility of impairment to property and equipment as a result of low capacity utilisation.
He noted that the recapitalisation of the group remained fundamental to its survival.
Apart from Tube & Pipe, Steelnet operates BMA Fasteners, which makes industrial fasteners and mining bolts.
It also owns Hastt, which makes tractor and animal-drawn agricultural implements.
All the three factories require urgent restocking of raw materials to enable them to service available demand and grow volumes.
In the full year to December 31, 2010 Steelnet recorded a US$5,2 million loss due to low capacity across its operations.
The group indicated that the successive losses recorded over the past two years were now a threat to its ability to continue operations.
Capacity of the group’s operations was mainly affected by inadequate raw materials, significant impairment on property, high borrow- ing costs and doubtful debt provisions.
Steelnet is ranked among the lowest shares by market capitalisation on the local bourse.
Traditionally, the diversified steel products manufacturer used to have a strong export market in the countries such as South Africa, Angola, Botswana, Mozambique and Zambia. It was unbundled from TZH in 2002.