The board and management at Penrice are doing a great job keeping it alive.
It is scraping by on razor thin margins. The last numbers I have seen show that the chemicals division lost $200,000 on $56.9 M revenue at the EBIT level in 6 months. Since then the rise in the Australian dollar will be biting hard as Penrice can only sell at the level of its international competitors.
Any small upset in this fragile company could be terminal. It has no cash cushion for a rainy day. Dividends are already gone, the bankcard is maxed out. Now we have the carbon tax coming.
Penrice is energy intensive. It is one of South Australia's largest energy consumers. It buys electricity, steam and coke in great quantities. It buys ammonia. All of these things will be directly affected by the Carbon Tax.
Like all other industries it will feel the indirect expense on everything from packaging and shipping to spare parts. It won't be able to pass these costs on to the glassmakers who could chose the imported product.
Hopefully the government gives some compensation back to Penrice. However is it likely to be 100% compensated? Any small loss will be terminal.
Still this is probably the intended effect of the Carbon Tax. To reduce Australia's carbon footprint by closing down some energy intensive industries and replacing them with imports.
The Penrice employees may be able to hold their heads up on their last day knowing their jobs were sacrificed as a noble example to other countries.
bacci
PSH Price at posting:
23.0¢ Sentiment: Sell Disclosure: Not Held
