Aluworks, the manufacturer of aluminium products in Ghana, is currently under pressure to seek huge investments in working capital to grow the company to the level of productivity, effectiveness and efficiency.
The company is seeking US$40million from investors to boost its current production capacity of under 4,000 metric tonnes per annum to 20,000 metric tonnes per annum.
The investment would also push the company into being able to meet its first objective of stopping foreign importation at the back of the ruling in favour of Aluworks by the Ghana International Trade Commission (GITC) against the dumping of aluminum products from China onto the Ghanaian market.
GITC, also on October 15, 2020, recommended an additional import duty of 35.77% be imposed on such goods in the future. This, according to the Acting Board Chairman of the company Professor Lade Wosornu, will ensure a level playing field in terms of price and allow quality to prevail.
Speaking in an interview with the B&FT during the company’s 33rd annual general meeting – held at its premises in Tema but broadcast virtually to shareholders, Prof. Wosornu said: “We do have high quality products; therefore, going forward we expect an influx of orders for our products. However, we still have the major problem of securing financing to enable us meet the expected increase in demand arising from importing customers becoming local purchasing customers”.
He said the company is confronted with numerous challenges including under-production and declining cash-flow; struggling to hold its prices in the face of cheap imported alternatives; market share remains under pressure; and VALCO continues to deduct 10% off payments from metals due to unpaid balance of an old business account.
2019 performance
Aluworks sold 4,167 tonnes of products, representing a 9.9% of increase over sales in 2018. A total of 2,924 metric tonnes, which is 70%, was sold on the local market with the other 30% representing export sales of 1,243 metric tonnes.
The slightly increased volume in 2019 enabled the achievement of break-even at gross margin level compared with a loss of 9% in 2018. This underlines the need to significantly increase the volume of output.
“Going forward, without the much needed investment in working capital there is a risk of a fall in turnover and a rise in our losses. In 2019, turnover increased over that in 2018 by 23%; from GH¢62.5million in 2018 to GH¢77million in 2019,” Prof. Wosornu said.
Managing Director of the company, Ernest Kwesi Okoh, described the company’s current state as a very serious one, as the Chinese have been hurting the country with its cheaper products over the past 12 years. He explained that before the Chinese invaded the Ghanaian market, they used to sell between 18,000 to 19,000 metric tonnes of aluminium products per annum; but currently, they sell under 4,000 metric tonnes annually.
“The state of affairs is that we are under great pressure to find reinvestment in working capital to be able to meet requirements in the new situation we are in. The GITC ruling means that anybody importing aluminium products from China on the basis of exports the Chinese government uses to gain will have to pay extra duty when they arrive here. That gives us an opportunity to sell our products at the right price.
“Our difficulty is that now we have to find money to make this new position a reality. We have suffered all these years, made losses upon losses. This is the time we can start turning things around. The local and West African markets are growing with huge demands. If we can get US$40million today, we will go back to producing 20,000 tonnes per annum – and in a year or two you will see Aluworks back in business, making huge profits,” Mr. Okoh stated.
A resolution was passed that saw the company’s name changed from Aluworks Limited to Aluworks Plc in accordance with the new Companies’ Act, 992.
The shareholders believe that with the GITC ruling, the company’s major shareholders – SSNIT (62.62%) and Caitlyn Limited (20.86%) – will reach an agreement that provides capital investment for the company to thrive again shortly. They also commended the board of directors and management for their tireless efforts toward reviving the company, describing the company’s 2019 performance as better compared to the previous years.
