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Review of operations: specialty fibres

SANS Fibres

In November, AECI announced that it was contemplating the closure of the industrial fibres and polyethylene terephthalate operations at SANS Fibres (SANS) in Bellville, Western Cape. SANS has been under threat for some time and exhaustive and protracted attempts to find sustainable solutions for its long-term future were unsuccessful.

Once production ceases at the end of March 2009, asset recovery and site clearance will commence and are expected to be completed by the end of the year. Land realisation will also commence by end-2009.

Early in November 2008, the South African Clothing and Textile Workers Union (SACTWU), being the representative union, and other consulting parties were given due notice of the contemplated closure in writing, inviting them to enter into a process of consultation on relevant issues, as required by law.

In February 2009, the parties reached agreement on the rationale for closure. The parties also agreed on issues relating to the closure and retrenchment process and confirmed 31 March 2009 as the date on which operations will cease at Bellville.

SANS Technical Fibers at Stoneville, North Carolina, USA, is not affected by the closure of Bellville. It is, and is expected to remain, profitable. It will run as a stand-alone operation for the foreseeable future and is accounted for in continuing operations.

As a result of the closure and the subsequent disposal of Bellville’s assets, the cash from the disposal, after providing for closure costs, will be approximately equal to the carrying value on the balance sheet. This process is expected to be completed in the next 12 to 18 months and could include the sale of the land.

The immediate effect of the Bellville closure is that a provision for closure costs of R148 million after tax (R204 million before tax) was taken against headline earnings in 2008, and this resulted in a reduction in HEPS of 137 cents for the financial year ended 31 December 2008.

SANS recorded a trading profit of R204 million in 2008.

Financial performance (Rm)